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CFS Annual Report - 2022

Reimbursement for Business Use of Personal Vehicles
Model Year 2022

Study prepared for
The Treasury Board of Canada Secretariat

by Corporate Fleet Services

November 2021

1       Executive Summary

Corporate Fleet Services (CFS) has been mandated by the Treasury Board of Canada Secretariat to perform the annual evaluation of per-kilometre reimbursement rates for government employees required to use their personal vehicles while performing government business. This study assesses all vehicle operating expenses and provides recommendations for reimbursement rates for each Canadian Province and Territory.

The present study is based on 2022 model year vehicles and accounts for all of the following:

This report summarizes all assumptions, methodology, values and findings. It presents up-to-date recommended rates of reimbursement for consideration by the Treasury Board of Canada Secretariat.

1.1     Methodology and Evaluation

The recommendations are given for the year 2022 for:

These rates are given on a per-kilometre basis, for each Province and Territory. This is intended to accurately account for differences in vehicle operating costs across Canada.

The recommendations are based on total costs of operating privately owned or leased vehicles. In order to reflect realistic conditions, the study assumes an annual driving distance of 20,000 kilometres and ownership terms of both four and five years. Fixed costs include ownership expenses consisting of depreciation, financing or leasing interest and taxes, as well as vehicle insurance and registration. Variable costs cover fuel, preventative maintenance, repairs, tires and miscellaneous items. All cost variations between the Provinces and Territories are accounted for, as well as the special driving conditions in the three Territories.

Weighted average nationwide costs of operating personally owned or leased vehicles were determined to be $0.550 per kilometre, as compared to $0.555 in the previous Fuel Update (August 2021, for publication on October 1st, 2021) and $0.525 in the previous year Annual Report (November 2020, for publication on January 1st, 2021). The slight overall decrease versus the previous Fuel Update was due to lower ownership costs, driven primarily by irregularly high vehicle resale values, which in turn were caused by severe supply chain disruptions in microchip manufacturing during the past year. Refer to Section 4.1.9 for a detailed analysis.

The following table indicates Canadian average expenses by cost component as calculated in the current study, in dollars per kilometre, before rounding up to the nearest half-cent:

Cost component

Cost
(dollars/km)

Cost sub-component

Cost
(dollars/km)

Ownership

$0.230

Depreciation

$0.168

Interest

$0.021

Acquisition Sales Tax

$0.041

Registration

$0.007

Registration

$0.007

Insurance

$0.087

Insurance

$0.087

Fuel

$0.119

Fuel

$0.119
Maintenance $0.103

Preventative Maintenance

$0.053

Repairs

$0.018

Tires

$0.014

Miscellaneous

$0.007

Maintenance Sales Tax

$0.011

TOTAL

$0.546

Rounded up to $0.550 

$0.546

 

The largest component of vehicle operating expenses is ownership (encompassing depreciation, interest and acquisition sales tax), which accounts for 42.1% of total costs, followed by fuel expenses at 21.8%.

2       Preamble

Corporate Fleet Services (CFS) has calculated reimbursement rates for business use of personal vehicles by government employees according to the methodology and parameters listed in a Statement of Work issued through a competitive RFP process. CFS is therefore pleased to present this study with its findings and recommendations, based on extensive research performed on behalf of the Treasury Board of Canada Secretariat.

2.1     Note on Methodology

The current study follows strictly the methodology employed in the previous Annual Report (November 2020, for publication on January 1st, 2021) as well as subsequent Fuel Updates. The analysis is deemed to accurately reflect costs in the current Canadian automotive marketplace and is described in detail in Sections 3 through 6.

2.2     Policy Recommendations

It is our opinion that public employees continue to be reimbursed for government business use of personal vehicles on a cents per kilometre basis, reflective of the practice that has been in use since 1999. This is deemed to be consistent with current public and private sector practices as well as it accounts for a fair and simple reimbursement method in line with accepted reimbursement policies across Canada.

However, since there are substantial differences among the ten Canadian Provinces and three Territories, these rates are calculated separately for each Province and Territory in order to account for differences in vehicle operating costs.

3       Methodology And Cost Component Determination

3.1     Assumptions

The present study’s objective is to determine reimbursement rates for business use of personal vehicles by government employees, in order to reflect current Canadian automotive market conditions, as accurately as possible. In order to accomplish this, an in-depth analysis was performed on all components of the total cost of operating a vehicle.

The methodology employed follows all the elements listed in the Statement of Work that were similarly used in the previous Annual Report (November 2020, for publication on January 1st, 2021). The purpose was to calculate the different rates of reimbursement, in cents per kilometre, separately for all ten Canadian Provinces as well as the three Territories. In light of this, we performed research and data analysis to calculate costs for the following components, which represent the total costs of running a personal vehicle:

  1. Fixed expenses
    •  Ownership
      • depreciation
      • prevalent retail rebates
      • financing methods
      • prevalent interest rates
      • applicable sales taxes
      • projected resale values
    • Registration and licensing
    • Insurance
  2. Variable expenses
    • Fuel
    • Vehicle maintenance
      • Preventative maintenance
      • Projected costs of repairs beyond manufacturer warranty
      • Tires
      • Miscellaneous expenses

All calculations assumed four and five year retention periods as well as considered all vehicles to run an average of 20,000 kilometres per year.

In addition, in order to assess current prevalent insurance premiums by Province and Territory, the study used a certain demographic range to reflect the average government employee. The demographics are based on data available from the Treasury Board of Canada Secretariat as well as Statistics Canada. The following characteristics were used:

The following table gives an overview of the cost proportion of the components involved in total expenses of operating a vehicle:

Expense Cost Proportion
Acquisition Sales tax 7.5%
Depreciation 30.8%
Fuel 21.8%
Insurance 15.9%
Interest 3.8%
Maintenance Sales Tax 2.0%
Preventative Maintenance 9.7%
Registration 1.3%
Repairs 3.3%
Tires 2.6%
Miscellaneous 1.3%

3.2     Vehicle Selection

In order to be reflective of the Canadian marketplace we have performed a thorough study throughout all Provinces and Territories, focusing on 59 vehicle models (nameplates) grouped under six vehicle classes for the Provinces, and three classes for the Territories (small crossovers/SUVs, medium crossovers/SUVs and light duty pick-up trucks). The models studied account for a significant portion of the Canadian vehicle market, and they were deemed representative for the types of vehicles used by government employees.

The following list describes the parameters used:

Make

Model

Class

Weight for Provinces

2022 Model Year Pricing*

Honda

Corolla

Compact

5.8%

$23,880

Toyota

Civic

Compact

5.6%

$28,465

Hyundai

Elantra

Compact

3.4%

$23,724

Kia

Forte

Compact

2.1%

$23,240

Volkswagen

Jetta

Compact

1.7%

$27,595

Mazda

3

Compact

1.6%

$26,500*

Nissan

Sentra

Compact

1.5%

$23,968*

Volkswagen

Golf

Compact

1.4%

$29,545*

Kia

Soul

Compact

0.9%

$24,990

Subaru

Impreza

Compact

0.5%

$26,570

Toyota

RAV4

Small Crossover/SUV

9.0%

$32,550

Honda

CR-V

Small Crossover/SUV

7.3%

$35,440

Nissan

Rogue

Small Crossover/SUV

4.4%

$32,958

Mazda

CX-5

Small Crossover/SUV

3.8%

$32,650

Ford

Escape

Small Crossover/SUV

3.7%

$32,294

Hyundai

Tucson

Small Crossover/SUV

3.6%

$31,624

Hyundai

Kona

Small Crossover/SUV

3.4%

$25,824

Subaru

CrossTrek

Small Crossover/SUV

3.2%

$27,595*

Volkswagen

Tiguan

Small Crossover/SUV

2.6%

$34,845

Nissan

Kicks

Small Crossover/SUV

2.4%

$21,728

Toyota

Camry

Mid-Size

1.7%

$30,840

Honda

Accord

Mid-Size

0.9%

$34,270*

Hyundai

Sonata

Mid-Size

0.5%

$29,274

Volkswagen

Passat

Mid-Size

0.3%

$33,845*

Chevrolet

Malibu

Mid-Size

0.2%

$27,398

Mazda

6

Mid-Size

0.2%

$29,700*

Kia

K5

Mid-Size

0.2%

$31,345

Nissan

Altima

Mid-Size

0.2%

$31,328

Subaru

Legacy

Mid-Size

0.1%

$28,520

Chrysler

Grand Caravan

Minivan

2.5%

$40,685*

Toyota

Sienna

Minivan

1.6%

$42,350

Chrysler

Pacifica

Minivan

0.7%

$52,190

Kia

Carnival

Minivan

0.6%

$36,645

Honda

Odyssey

Minivan

0.6%

$45,475

Toyota

Highlander

Medium Crossover/SUV

2.7%

$46,350

Jeep

Wrangler

 Medium Crossover/SUV 2.2% $42,035

Jeep

Grand Cherokee

Medium Crossover/SUV

2.2%

$55,140

Ford

Explorer

Medium Crossover/SUV

2.1%

$47,804

Hyundai

Santa Fe

Medium Crossover/SUV

2.1%

$35,424

Toyota

4Runner

Medium Crossover/SUV

1.1%

$49,110

Ford

Bronco Sport

Medium Crossover/SUV

1.0%

$34,594

Honda

Pilot

Medium Crossover/SUV

1.0%

$51,490

Dodge

Durango

Medium Crossover/SUV

0.8%

$51,060*

Chevrolet

Traverse

Medium Crossover/SUV

0.7%

$41,398

Tesla

Model 3

Battery Electric/Plug-in Hybrid

1.6%

$46,629

Chevrolet

Bolt

Battery Electric/Plug-in Hybrid

0.8%

$39,998

Toyota

Prius Prime

Battery Electric/Plug-in Hybrid

0.8%

$35,340

Hyundai

Kona EV

Battery Electric/Plug-in Hybrid

0.7%

$45,524

Ford

Mustang Mach E

Battery Electric/Plug-in Hybrid

0.6%

$53,490

Mitsubishi

Outlander PHEV

Battery Electric/Plug-in Hybrid

0.5%

$45,848

Hyundai

Ioniq BEV

Battery Electric/Plug-in Hybrid

0.2%

$43,324*

Kia

Niro PHEV

Battery Electric/Plug-in Hybrid

0.2%

$36,390

Kia

Niro EV

Battery Electric/Plug-in Hybrid

0.2%

$46,790

Nissan

Leaf

Battery Electric/Plug-in Hybrid

0.2%

$39,448

* Note: The current study used 2021 model-year pricing for vehicles for which prices were not yet available for 2022 model-year. All prices are given before applicable taxes.

Distribution of vehicles studied by class

Vehicle Class Distribution
Battery Electric/Plug-in Hybrid 6%
Compact 25%
Medium Crossover/SUV 16%
Mid-size 4%
Minivan 6%
Small Crossover/SUV 43%

 

Distribution of vehicles studied by brand name

Brand Name Distribution
Chevrolet 1.8%
Chrysler 3.2%
Dodge 0.8%
Ford 7.4%
Honda 15.5%
Hyundai 13.9%
Jeep 4.4%
Kia 4.3%
Mazda 5.6%
Mitsubishi 0.5%
Nissan 8.6%
Subaru 3.8%
Tesla 1.6%
Toyota 22.6%
Volkswagen 6.0%

 

3.3     Data Sources

The present study used information available in the public domain, data from previous studies that we have performed, as well as new research and consultations with specialized professionals and agencies. For each element studied we confirmed the accuracy of the data by consulting additional data sources and cross-referencing the findings. All data sources were assessed for reliability and were thoroughly documented.

3.4     Use of Weighted Averages

In order to accurately reflect current market conditions, consistent with the methodology employed in the previous year’s report, the present study follows a weighted average approach instead of a simple average, by employing weighted arithmetic means where relevant. This was deemed necessary because not all elements calculated contribute the same amount to the total. For example, according to the most recent information available from Statistics Canada, in Ontario there were approximately 72 times more vehicles registered than in Prince Edward Island, and thus the two regions contribute significantly different amounts to the overall Canadian average. This method was employed throughout the study to better reflect the reality of the Canadian market.

In the same manner, certain vehicle models sell significantly more units on the Canadian market than others and therefore contribute more to the overall weighted average. For example, the Honda Civic sells considerably more units in Canada than a Volkswagen Golf, approximately four times the amount, and therefore the operating costs for the Honda Civic should reflect proportionately in the total calculated weighted average for each component of the cost. See Section 3.2 - Vehicle selection for details.

4       Fixed Expenses Analysis

4.1     Ownership Costs

4.1.1     Current model-year vehicle prices

4.1.1.1       Vehicle pricing

For each vehicle under study, we have extracted 2022 model year MSRP (Manufacturer Suggested Retail Price) values. The main tool employed was AutoQuote, the industry leading software that provides up-to-date detailed pricing for all new vehicles available on the Canadian market. At the time of the current study, pricing was not yet available for ten (10) vehicle models out of a total of 59. For these, 2021 model-year values were used, as in our experience these values vary only slightly from year to year and are generally reflective of 2022 values. MSRP pricing is established by the manufacturers for the whole model year and is valid across Canada. Variations of the MSRP prices throughout the year are infrequent. Values extracted from AutoQuote were also cross-checked against the information published by vehicle manufacturers. On average, MSRP prices for vehicles studied increased by approximately 2% as compared to the previous year.

4.1.1.2       Prevalent manufacturer rebates

Vehicle manufacturers usually offer retail rebates for new vehicles in order to promote sales and distinguish themselves from their competition. We have thus performed substantial research to determine prevalent retail rebates for all vehicles studied. A period of one year was used as retail rebates vary from month to month as well as display variation by:

All the data obtained was integrated into a 2,301 data-points matrix and subsequently reflected in the purchase price of each vehicle, by Province and Territory and by the type of acquisition. Direct price negotiation between vehicle retailers and buying individuals could not be accounted for in this study.

Rebates range from $0 to $7,176, depending primarily on each manufacturer’s marketing strategy, with an average of approximately $895. In general, rebates have seen an increase from the previous year, especially for the financing and leasing methods of acquisition.

4.1.1.3       Federal and provincial levies

Provincial and federal levies apply to the purchase of new vehicles and are intended in principle to offset environmental costs such as disposal and recycling of air conditioning fluids or tires. For the vehicles under study the following levies apply:

All applicable fees and levies have been factored in the analysis.

4.1.1.4       Provincial and federal rebates for electric vehicles

Six Canadian Provinces (British Columbia, Quebec, Nova Scotia, New Brunswick, Newfoundland and Labrador and Prince Edward Island) as well as two Territories (Northwest Territories and the Yukon) currently offer government-funded rebates for the acquisition of a Battery Electric (BEV) or Plug-in Hybrid Electric vehicle (PHEV). Rebates offered by Provinces and Territories range between $1,500 and $8,000 per vehicle.

Additionally, the Federal Government offers its own electric vehicle incentive, applicable across Canada. Battery Electric as well as Plug-in Hybrid Electric vehicles with battery capacity of at least 15kWh (equal to a range of 50 km or more) are eligible for a rebate of $5,000. Plug-in Hybrid Electric vehicles with a shorter range are eligible for a $2,500 rebate. Where applicable, Federal and Provincial rebates vary by a number of factors, such as battery capacity, vehicle size and MSRP cost. All these particular variations were integrated in the study accordingly. The following table lists all currently applicable Federal and Provincial ‘green vehicle’ rebates, by type:

Area of application Type
Battery Electric Vehicle (BEV) Plug-in Hybrid Electric (PHEV)
FEDERAL $5,000 $2,500
BC $3,000 $1,500
QC $8,000 $4,000
NS $3,000 $2,000
NB $5,000 $2,500
NL $2,500 $0
PE $5,000 $2,500
YT $5,000 $3,000
NT $5,000 $5,000

 

4.1.2     Method of vehicle acquisition

We have performed research on the Canadian market to establish which methods of vehicle acquisition are the most prevalent, as well as what market share is held by each. We have therefore come to the conclusion that in Canada the new vehicle market is currently distributed among the following three forms of acquisition as follows:

Therefore, in order to accurately reflect the reality of the market, we have analyzed all three forms of acquisition and subsequently calculated a weighted average for each vehicle under study according to their proportion of the market. It must be noted that, as compared to the previous Annual Report, a slight shift from leasing toward financing contracts has been observed.

The net cost of vehicle ownership was calculated according to the method of acquisition (cash, financing or leasing). All three vehicle acquisition methods were addressed with their specific particularities, proportionately with their prevalence in the Canadian automotive landscape, as follows:

4.1.3     Four and five year retention periods

We calculated ownership costs for both four and five-year retention periods, terms that were found to be reflective of average retention periods for the Canadian automotive landscape. All calculations were performed by vehicle and per Province or Territory taking into account both retention periods, and the results were averaged to yield one value per vehicle, by Province or Territory.

4.1.4     Vehicles driven 20,000 kilometres annually

All vehicles under study were considered to be driven 20,000 km per year. This is deemed to be a reasonable benchmark to base all reimbursement calculations on, since the average Canadian vehicle is driven between 16,000 and 24,000 km per year. All calculations were made using this benchmark all across Canada.

4.1.5     Financing interest rates

We have performed in-depth research to determine the prevalent interest rates provided by vehicle manufacturers. The manufacturers offer what is known as subvented rates to promote sales of new vehicles. These rates are typically substantially lower than regular financial institutions’ loans. Since these reduced rates are prevalent on the market, we deemed it reflective of reality to integrate these rates into our calculations.

Interest rates vary considerably by:

All these variations were integrated into a 3,068 data-points matrix and subsequently reflected in the ownership costs of each vehicle, by Province and Territory.

For the current study all vehicle models studied had manufacturer-established interest rates available for 4 and 5 year financing. However, while all the manufacturers studied offered subvented leasing rates, some did not offer them for certain models on 4 and 5-year leasing terms. In these instances, average market (financial institutions or third-party leasing company) rates were used.

All interest rates (financing and leasing) varied from 0% to 8.17% for manufacturers’ subvented rates, while the third-party interest rates were approximated at 8.00%. The average interest rate for financing contracts was 2.11%, while the lease rate was 4.45%. Overall, interest rates are higher as compared to the previous year, recording a 13% and 15% increase respectively.

4.1.6     Sales taxes

Federal and provincial sales taxes (GST, PST, QST, HST) apply to the full cost of a new vehicle according to the taxation method of each Province or Territory. Sales taxes also apply to:

Whether a vehicle is cash-purchased, financed or leased, taxes apply differently. For both cash purchases and financing contracts, the full price of a new vehicle is subject to sales tax, whereas for leased vehicles sales tax is only applied to monthly lease payments (including tax on interest).

Sales taxes have been factored into all calculations as to accurately reflect the direct costs to the end user of a vehicle. Following is a table listing the combined GST/PST/QST/HST applicable for each Province and Territory for the period relevant to the current study:

Sales taxes in Canada
by Province and Territory

Combined sales taxes

Alberta

5%

British Columbia

12%

Manitoba

12%

New Brunswick

15%

Newfoundland and Labrador

15%

Northwest Territories

5%

Nova Scotia

15%

Nunavut

5%

Ontario

13%

Prince Edward Island

15%

Quebec

14.975%

Saskatchewan

11%

Yukon

5%

 

4.1.6.1       Taxes on fuel

Fuel prices listed at the pump have all taxes included, as is the standard throughout Canada. Fuel is usually taxed federally, provincially as well as regionally. Approximately a third of the price paid at the pump is made up of the following:

All fuel prices given in the present study have all taxes included.

4.1.6.2       Taxes on insurance premiums

Regular sales tax (GST/PST/QST/HST) as well as additional insurance-specific taxes apply differently to insurance premiums across Canada depending on each Province or Territory. Insurance premiums given in the present study account for all applicable taxes.

4.1.6.3       Recent and upcoming tax rate changes

We have consulted directly with all relevant public sources in order to determine if there are any impending tax rate changes across Canada in the near future. At this time, no changes in sales taxes are foreseen anywhere in Canada.

For each subsequent update of the present study, research will be performed again for all Canadian Provinces and Territories to determine if tax amounts have changed or if any changes are foreseen in the future.

4.1.7     Resale values (vehicle remarketing)

In order to accurately assess total costs of vehicle ownership, an analysis was performed, for each vehicle under study, to project resale values for retention periods of four and five years, based on historic patterns. Resale values were extracted from resale market data for the same or similar vehicle model. The research was based on:

The values were extracted from the Canadian Black Book, an industry standard for establishing values for used cars and were supported through consultation with specialized vehicle resellers, as well as employing other relevant tools. Final values were projected for:

Resale values were integrated into the depreciation analysis differently depending on the type of acquisition, as follows:

On average, vehicle resale values increased over the course of the past year by approximately 14%. The COVID-19 pandemic has had a significant impact on the supply and demand balance in both the new and used vehicle markets. Severe supply shortages over the course of the past year led to a reduced supply of new vehicles, which in turn drove resale prices for used vehicles up considerably. This anomaly is expected to continue until supply chains normalize, well into 2022 and potentially even into 2023.

4.1.8     Total cost of ownership calculations

For each Province and Territory, total costs of ownership were calculated for:

A weighted average was then calculated for all vehicles under study to yield a final cost-of-ownership figure per Province and Territory. All figures were converted and expressed in dollars per kilometre.

The following three tables give a detailed break-down of vehicle ownership costs in Canada in dollars per kilometre, by vehicle class, four- and five-year retention periods, split by depreciation costs, financing costs (interest) and sales taxes, as well as a weighted average according to vehicle sales figures:

DEPRECIATION

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrids

Weighted Average

4-yr ownership

$0.151

$0.183

$0.236

$0.162

$0.209

$0.187

$0.173

5-yr ownership

$0.138

$0.175

$0.218

$0.151

$0.204

$0.183

$0.163
       

$0.168

---

INTEREST

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrids

Weighted average

4-yr ownership

$0.009

$0.019

$0.037

$0.016

$0.031

$0.032

$0.019

5-yr ownership

$0.012

$0.023

$0.039

$0.020

$0.038

$0.034

$0.023
       

$0.021

---

ACQUISITION SALES TAX

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrids

Weighted average*

4-yr ownership

$0.034

$0.043

$0.056

$0.042

$0.060

$0.050

$0.045

5-yr ownership

$0.029

$0.036

$0.047

$0.035

$0.051

$0.042

$0.037
       

$0.041

* Note: total weighted averages are rounded to 3 decimals.

4.1.9     Costs of ownership changes from the previous year

A slight increase in MSRP prices and interest rates was partially offset by a proportional increase in manufacturer rebates and residual values.

As the economic recovery was taking place, the demand for vehicles rebounded rapidly. However, due to severe microchip supply shortages that significantly delayed deliveries of new vehicles, used cars have been selling at well above normal rates. Increased resale values reduce the depreciation, thus reducing the overall cost of owning a vehicle. For example, if a vehicle’s purchase price is $35,000 and its regular resale value in the market in 4 years is $15,000, that means this vehicle has a total depreciation of $20,000 over the period, or $5,000 per year. If the same vehicle’s resale value increases to $19,000, the depreciation over the four-year period is $16,000 dollars or $4,000 per year.

Thus, the increased resale values have lowered overall costs of ownership across all vehicle categories, which was especially felt in the Medium Crossover/SUV and Truck categories, with certain used models selling at $5,000-$8,000 more than their usual rates. This disproportionately affected ownership costs in the Territories since the calculations are based on Crossovers/SUVs and Trucks.

4.2     Vehicle Registration and Licensing Costs

Vehicle registration, licensing and plating is regulated at the provincial level. Each Canadian Province and Territory has its own regulatory body governing the rules and costs of vehicle licensing. Registration costs are typically charged annually in the form of a registration renewal. In some Provinces there are certain one-time up-front costs that are charged only at the time of the initial vehicle registration.

We have performed a complete study of these costs by contacting all provincial and territorial authorities. Registration costs do not have additional taxes applied to them as payment is made directly to the respective governmental agencies. The terms registration and licensing are used interchangeably in this study.

Registration costs vary by:

All these costs have been integrated in the calculations for each Province and Territory. Annual registration costs vary between $42 and $253 and contribute a weighted average of $0.007 per kilometre for all of Canada.

The following table lists annual registration costs for all the Provinces and three Territories:

Province/Territory

Annual
registration costs

Registration costs
in $/km

Alberta

$94

$0.005

British Columbia

$61

$0.003

Manitoba

$136

$0.007

New Brunswick

$134

$0.007

Newfoundland and Labrador

$180

$0.009

Northwest Territories

$83

$0.004

Nova Scotia

$125

$0.006

Nunavut

$70

$0.004

Ontario

$120

$0.006

Prince Edward Island

$130

$0.007

Quebec

$253

$0.013

Saskatchewan

$68

$0.003

Yukon

$42

$0.002

 

4.2.1     Note on the Province of Quebec

It must be noted that in Quebec, provincially regulated bodily injury insurance must be purchased through the annual vehicle registration process. This is the reason why registration costs in Quebec are generally higher than the other Provinces or Territories.

4.3     Vehicle Insurance Costs

4.3.1     Regulation of vehicle insurance

Insurance rates vary greatly across Canada, primarily due to different provincial laws determining vehicle accident fault, subrogation or no-fault policies. Vehicle insurance is offered by private insurers in Alberta, Ontario as well as the four Atlantic Provinces and the three Territories. Quebec, however, has a hybrid system where bodily injury insurance is provided by the Province through its vehicle registration process, while third-party liability is provided by private insurers. On the other hand, the Provinces of British Columbia, Manitoba and Saskatchewan have mandatory public vehicle insurance. Insurance in these three Provinces is offered exclusively by the provincial governmental bodies.

4.3.2     Variability of insurance premiums

Insurance premium rates vary considerably not only from Province to Province, but also according to a substantial number of other parameters related to the insured driver’s personal characteristics as well as to the vehicle being insured. Where insurance is offered privately, insurance premiums also vary considerably from one insurer to another.

4.3.3     Analysis of prevalent insurance premiums

We have performed in-depth research into current prevalent insurance premium rates for the average government employee to keep these figures in line with current market conditions as well as recent industry publications. The steps taken to determine the insurance rates used in the present study were as follows:

  1. Insurance premium costs were assessed based on the average government employeeas described in Section 3.1. We requested over 180 quotes based on this established demographic directly from private insurers as well as insurance brokers. For Provinces with public insurance the data available from the governing bodies was used.
  2. A thorough research of publicly available information on average insurance premiums across Canada was performed. Publications by the Insurance Board of Canada (IBC) was identified as a reliable source to benchmark current average insurance premiums in all Canadian Provinces and Territories, also substantiated by data from other publications.
  3. Using the figures provided by the Insurance Board of Canada (IBC), a variability factor was added to establish the maximum threshold for individual quotes obtained for the average government employee in each Province and Territory. The variability factor represents the following:
    1. The differences between the average driver/vehicle in Canada and the average government employee.
    2. The assumption that an individual would make a choice towards a more affordable insurance option available after obtaining and comparing several insurance quotes from different insurance providers.
  4. Prevalent insurance premiums were determined by averaging the quotes that fall below the established reasonable threshold for each Province and Territory.

Following is a table listing average insurance premiums for the ten Provinces and three Territories as well as a comparison with the insurance premiums published in the previous year study, for direct comparison (averaged annual premiums have been rounded up to the nearest $25):

Province/Territory

Current insurance premiums

Insurance costs
in $/km

 January 1st 2021
Annual Report insurance premiums

Alberta

$2,025

$0.101

$1,875

British Columbia

$1,500

$0.075

$1,700

Manitoba

$1,300

$0.065

$1,350

New Brunswick

$1,475

$0.074

$1,350

Newfoundland and Labrador

$1,750

$0.088

$1,775

Northwest Territories

$1,850

$0.093

$1,875

Nova Scotia

$1,550

$0.078

$1,525

Nunavut

$1,825

$0.091

$1,850

Ontario

$2,200

$0.110

$2,225

Prince Edward Island

$1,225

$0.061

$1,125

Quebec

$1,200

$0.060

$1,175

Saskatchewan

$1,300

$0.065

$1,450

Yukon

$1,425

$0.071

$1,500

 

The values obtained through the present study are deemed to be reflective of the current reality for the established demographic. Insurance rates vary between $1,200 and $2,200, with a Canadian weighted average of $0.087 per kilometre.

Notably, public insurance premiums in British Columbia and Saskatchewan have seen considerable decreases this year, albeit for different reasons. On May 1st, 2021, British Columbia switched to a no-fault insurance approach called Enhanced Care that the Insurance Corporation of British Columbia (ICBC) estimates will be less expensive to operate, saving about $1.5 billion in costs annually. This, in turn, reduces the insurance premiums for their customers.

In Saskatchewan on the other hand, the Saskatchewan Government Insurance (SGI) issued $285 million in rebates to more than 700,000 customers this year. The rebate effectively reduces insurance premiums temporarily and thus it can be expected that the premiums will rise again in the following years unless further measures are taken.

5       Variable Expenses Analysis

5.1     Fuel Expenses

Fuel expenses are directly related to three main factors: buying location, fuel consumption of the vehicle and time of the year. The current study focuses on gasoline prices across Canada, which are strongly related to variations in the world energy market.

This report aims to provide an overview of the current market situation and present the latest estimates and forecasts pertinent to the energy market conditions. Nevertheless, similar to the previous reports, caution must be exercised when considering the data available due of the rapidly changing nature of the COVID-19 pandemic and its subsequent impact on global markets.

5.1.1     Energy Market Context

Over the past three months, global oil prices exhibited a sharp increase, followed by a sizable downward adjustment. From the lows recorded in mid-August, global crude rose steadily in September and most of October, supported by a rising demand. At the same time, supply was tight and, as a result, inventories went on a decline. The West Texas Intermediate (WTI) peaked at $84.65 USD per barrel and Brent reached $86.40 on October 26th, 2021, an increase of more than 30% over a two-month period and its highest level since 2014. For the past month, however, crude prices have been receding due to rising supply, as well as a moderating demand caused by a resurgence of new COVID-19 cases globally. As of November 20th, 2021, the WTI stands at $75.94 USD per barrel and Brent is at $78.89 USD per barrel.

While, in general, gasoline prices have followed crude oil, changes have been moderate over the past three months. As a result, the Canadian average price for gasoline rose by 4.1% as compared to the Fuel Update from August 2021 (for publication on October 1st, 2021).

This report strives to provide an overview of the current market situation and presents the latest estimates and forecasts pertinent to the energy market. Similar to previous reports, caution must be exercised when considering the data available due to the rapidly changing nature of global markets.

5.1.1.1      The Coronavirus Pandemic

The pandemic eased during late summer and early fall with new case numbers falling globally. This provided support to the economic recovery and rising demand for crude oil and gasoline products. However, another wave of infections began in October and is presently in full swing across Europe and the U.S. The rising infection rates are leading to renewed restrictions in many countries (e.g., Austria, that presently has one of the highest infection rates in the world, reintroduced strict lockdown measures in mid-November). Reportedly, Germany is also preparing for similar lockdowns in the near future.

Overall, vaccine doses administered globally have risen to 7.37 billion at the time of the writing of this report, an increase of 62% as compared to three months ago. Nevertheless, the vaccination coverage in most developing countries is still severely lagging, particularly in Africa. The world’s second most populous country, India, has significantly increased their vaccination pace – the total population fully vaccinated has risen from 9% in August to nearly 28% by November, representing more than 256 million people fully vaccinated in the past three months alone. According to the World Health Organization’s data, in the U.S., 59% or about 195 million people are presently fully vaccinated.

While Canada’s vaccine rollouts were initially delayed, the current vaccination rate of above 75% is higher than most other countries. Despite the high vaccination coverage, infection rates remain elevated at over 17,000 new cases per week in mid-November, as compared to just over 2,600 in July 2021. As a result, continued public health precautions are needed and risks are weighing on consumer confidence in Canada and elsewhere.

5.1.1.2       Global Crude Oil Demand

While global economic recovery has continued, it has been tempered by the spread and resurgence of the highly transmissible Delta-variant. As noted by the International Monetary Fund’s (IMF) World Economic Outlook (WEO) from October 2021, “pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries. Overall, risks to economic prospects have increased.”

As a result, global crude oil growth projections have been revised down by 0.1% for 2021 and are now at 5.9%, while projections for the next year remain unchanged at 4.9%. Despite the slight adjustments, some countries have seen much larger downward revisions than others, particularly in low-income developing countries. This has largely been driven by the worsening pandemic dynamics. Generally speaking, the vaccine accessibility and early policy support (or lack thereof) have been the principal drivers of the gaps in economic recovery.

Increasing economic activity, accompanied by supply chain disruptions, have caused high inflation rates across many advanced economies, including the United States, Canada, the United Kingdom and Germany, as well as many emerging-market economies (EMEs), including Brazil, Russia and Mexico.  

Currently, advanced economies are on a path to grow by 5.2% this year (a decrease from the 5.6% projection in the WEO Update from July 2021) and 4.5% in 2022. The Euro Area is projected to grow by 5.0% in 2021 and 4.3% the following year, while the United Kingdom (U.K.) is on a path to expand their economy by 6.8% and 5.0% respectively. Japan is also projected to see high recovery rates of 5.2% this year and 4.2% in 2022.

The U.S. economy grew at a strong pace in the first half of the year, surpassing its pre-pandemic output level. However, the growth in the third quarter of the year has been lower-than-expected, mainly driven by weaker consumption. This has been due to several reasons, including the lessening of past government transfers, as well as the temporary resurgence of COVID-19 cases during the summer. The IMF now estimates that the U.S. economy will grow by 6.0% in 2021, a 1.0 percentage point reduction from the previous WEO Update from July 2021. During the pandemic, the household savings rate increased significantly, and people are expected to begin spending the saved money, providing solid support for the GDP growth next year, that is now projected at 5.2%.

On the basis of the strong economic activity, the Federal Reserve announced plans to slowly taper their bond-buying stimulus over the next year. This indicates the Federal Reserve’s confidence in the U.S. economy. It also reduces the supply of dollars in the market, both factors causing the U.S. dollar’s (USD) value to rise. Furthermore, in October, the U.S. recorded a 6.2% inflation, the highest rate in 31 years. This added to the rising value of the USD. The USD and oil markets have an inverse relationship – when the dollar’s value rises, it makes it expensive for foreign countries to purchase oil that is quoted in USD, thus driving the demand down with the prices following. This relationship was one of the main driving factors in crude oil price declines in August as well as November of this year.

The Canadian economy has continued a robust growth, enabled by a high vaccination rate and the associated easing of containment measures. Nevertheless, the latest growth estimates have seen a downward revision due to the resurgence of the Delta variant, as well as the persistent supply-chain issues. The IMF projections for Canada have been revised down and currently are at 5.7% this year and 4.9% for 2022. According to the Monetary Policy Review (MPR) published by the Bank of Canada in October 2021, the current Bank of Canada projections are even more moderate, at 5.1% for 2021 (a reduction of 0.9 percentage points from the July 2021 MPR report) and 4.3% for the next year.

Strong demand globally as well as in Canada has run up against persistent supply chain constraints that are limiting production and increasing costs. This, in turn, has been exerting upwards pressure on prices for consumer goods, like in the case of used vehicles. Refer to Section 4.1.7 for details. Bank of Canada projects that the inflation in both 2021 and 2022 will be at 3.4% – well above the 2% target, as well as outside of the control range of 1% to 3%. In October 2021, the inflation rate was 4.7%, the highest since February 2003. This was the seventh month in a row the inflation rate was above the 3% target zone. Furthermore, the transportation bottlenecks and shortages of semiconductors as well as construction materials continue to limit certain Canadian export and import sectors such as vehicles and their parts, as well as construction projects.

Emerging markets and developing economies are projected to grow by 6.4% in 2021, a slight upward revision by 0.1 percentage points as compared to the WEO report update from July 2021. A further 5.1% growth is projected in 2022. The two largest economies in this group are projected to have high GDP growth rates. India’s economy will expand by 9.5% this year and 8.5% in 2022. China is projected to grow by 8.9% this year, mostly due to an upwards momentum in late 2020. China’s “zero tolerance” COVID-19 policy has led to more stringent efforts to contain the Delta variant this year, curbing economic recovery and affecting air travel, shipping, and supply chains globally. Combined with energy shortages, as well as fiscal and monetary policy tightening, the growth of China’s economy is projected to be 5.6% in the next year.

Overall, the robust economic recovery is being challenged by the persistent uncertainties about the path of the pandemic, the pace of the vaccine rollouts, as well as global supply chain issues. Furthermore, the sovereign debt levels in many regions, together with rising inflationary pressures and the related central bank responses, add to the uncertainty.

According to the Monthly Oil Market Report from November 2021, the OPEC estimates that global oil demand will be 96.4 million barrels per day (mb/d) this year, an increase of 6.2% over 2020. Next year, the demand is projected to grow by a further 4.2 mb/d, to average 100.6 mb/d, exceeding pre-pandemic levels. The International Energy Agency has been closely in line with their projections – they estimate that the total oil demand will be 96.2 mb/d this year, before reaching 99.6 mb/d in 2022.

The OPEC's reference basket price (calculated as a weighted average of prices of crude oil produced by OPEC countries) averaged $82.11 USD per barrel in October 2021, an increase of 11.1% over the previous month and 11.7% above July 2021. In a year-over-year perspective, the basket price has doubled, increasing by 105% as compared to October 2020, when it stood at $40.08.

5.1.1.3       Global Crude Oil Supply

In September and October 2021, global crude oil prices were buoyed by a rapidly returning demand that, however, was not fulfilled by adequate supply. This led to decreasing inventories which, in turn, pushed crude oil prices to seven-year highs.

In April, the OPEC+ coalition, consisting of 24 oil-producing nations, began steadily increasing production. Since August 2021, the group has been raising their supply limits by 400,000 barrels per day (b/d) every month, which translates into roughly a 0.4% monthly increase of the entire global supply. However, this has been insufficient to meet the high demand due to other disruptions affecting global oil supply, including an outage on a Mexican oil platform, pipeline issues in Libya and Nigeria, as well as the severe effects of hurricanes in the Gulf of Mexico.

This year’s hurricane season produced 21 named storms, making it the third-most active Atlantic hurricane season on record. Furthermore, this season had a greater and longer-lasting impact on the global oil balance than in previous years. The most significant storm this season was Ida, which made landfall as a category 4 hurricane near Port Fourchon, Louisiana on August 29th, killing 40 people. More than a week after the hurricane, 84% of offshore crude oil production remained offline, keeping 1.4 million barrels per day (mb/d) off the market. Notably, 18% of production was still offline more than three weeks after the hurricane. While the restoration work was still ongoing, another category 1 hurricane – Nicholas – made landfall, causing further shutdowns and worsening the supply. Severe production disruptions caused by the storms added to the upward pressures on the already tight global crude markets.

Geopolitical factors also contributed to rising global crude prices in September and October. The withdrawal of the U.S. army from Afghanistan increased the instability in the Middle East region, which accounts for nearly one-third of all global oil production. Production disruptions in this region can cause severe consequences for the oil supply and thus are a significant concern to global markets.

With supply being tight due to high demand, a limited OPEC+ production increase, as well as outages in American oil fields, inventory draws that had begun in summer continued well into fall. As reported by the International Energy Agency (IEA), OECD inventories – representing fuel stocks in developed economies – fell in September, taking them to their lowest level since 2015, at 250 million barrels below the five-year average. By mid-September, the U.S. Energy Information Administration (EIA) reported that inventories were down by 40% since the beginning of the year. Furthermore, data on the Cushing storage hub that is home to 14% of U.S. commercial storage capacity indicated that 35 million barrels were drawn from the facility in June 2021 – the largest draw ever since the EIA began tracking inventories in 1981.

The global oil markets saw some relief after 1.4 million barrels per day (mb/d) were added to the markets in October as production rebounded after hurricane Ida. The International Energy Agency (IEA) forecasts that another 1.5 mb/d should be added over the months of November and December, with the U.S. providing the biggest supply boost.

Typically, when prices rise, producers increase investments in new wells to profit from the beneficial market conditions. However, during the last oil price hike, this was not the case, with many North American shale producers increasing their investments only moderately. Presently, oil companies are focusing on their backlog of drilled-but-uncompleted (DUC) wells, which are cheaper and faster to bring into production.

As a result, U.S. oil production remained steady, and the EIA forecasts haven’t changed for the past three months – the U.S. annual production is projected to average 11.1 mb/d in 2021. With U.S. fracking oil field spending set to increase by 15% to 20%, the EIA projects that next year oil production will rise by 0.8 mb/d, averaging 11.9 mb/d. These investments, however, are still well below pre-pandemic levels. 

In the meantime, high prices have been boosting Canada’s oil production. Alberta supplies more than 70% of all oil produced in Canada and has been ramping up production. From January to September 2021, Alberta produced 9.1% more oil than in the same time period last year.

As discussed in previous reports, transportation of the Canadian crude to refineries in the U.S. has been the main issue in recent years, particularly with the Keystone XL project now cancelled. Thus, an important development for Canadian oil exporters has been the project by the Marathon Pipeline LLC to reverse their Capline pipeline. This pipeline runs from the Gulf Coast up to the Chicago, IL region. It used to be the largest pipeline from south-to-north in the United States, providing almost 1.2 mb/d to the market. Now with its flow being reversed, it will be able to provide additional transportation channels for Canadian oil to reach refineries at the Gulf. This improved transportation network is expected to provide a boost to the Western Canadian Select (WCS), possibly reducing the difference between the WCS and the WTI.

5.1.2     Gasoline prices across Canada

While the crude oil market experienced significant shifts over the past three months, fuel prices, on average, were affected less severely. This has been due to a number of factors, including the fact that gas prices had risen rapidly in the previous three-month period and thus were already elevated. Furthermore, switching to the less-expensive winter grade fuel in mid-October further eased the pressure. Lastly, the resurgence of COVID-19 cases in the U.S. and, more recently, in Canada, has led to a weakening of demand and therefore contributed to lowering prices at the pump.

As a result, the three-month average price for gasoline in Canada between the previous Fuel Update (August 2021, for publication on October 1st, 2021) and the current Annual Report has increased by 4.1%. In a year-to-year perspective, the three-month average price is 38.6 cents or 36.6% higher than in the fall of 2020.

An increase in gasoline prices has been observed across the majority of Canadian Provinces and Territories, ranging from a 3.51% increase in the Northwest Territories to a 6.88% increase in Quebec.  However, Nunavut remained constant, while British Columbia, on average, saw a slight decrease of 1.43%, largely due to a downward adjustment after gas prices in Vancouver rose faster than the rest of the country during the summer months. Nevertheless, the flooding in British Columbia following a storm in mid-November and the resulting transportation disruptions are likely to reverse this trend. The gasoline supply issues in the Province have been so severe that on November 19th, the provincial government introduced restrictions for non-essential drivers to allow up to a maximum of 30 litres of fill-up at a time, for a period of 10 days.

With the continued volatility of the energy markets, determined by global factors that are hard to forecast, it is difficult to make any prediction regarding gasoline prices for the next three-month period. However, any future changes will be reflected in the subsequent Fuel Update.

Prices of gasoline, in Canada, include all applicable taxes. Prices vary significantly across the country, mainly due to the difference in the types and amounts of taxes being charged on fuel in different Provinces and Territories. According to Natural Resources Canada, the vast majority of light duty vehicles on Canadian roads run on gasoline. We have therefore researched the average prices of regular gasoline charged at the pump. The fuel price data was primarily obtained from Natural Resources Canada via Kalibrate (previously Kent Marketing), based on daily published fuel prices for 78 locations across Canada. This data was verified against additional databases that similarly track fuel prices all across Canada.

Consistent with the methodology of the previous study, when determining average gasoline prices per Province or Territory, we have used a weighted average according to population in order to better conform to reality. In this manner, metropolitan population centers account for a greater portion of the total than smaller municipalities. Prices were tracked daily across Canada (except for Saturdays, Sundays and holidays).

Fuel price data was extracted for a period of three months (August 13th to November 12th, 2021) in order to better reflect current prices. Gasoline prices in Canada, outside of Nunavut, varied during this period between $1.226 in Sarnia, ON to $1.739 in Labrador City, NL, with a national average of $1.440.

The following is a table with three-month average regular gasoline prices for all Canadian Provinces and Territories, in dollars per litre, as well as gasoline prices from previous reports, for comparison:

Province/Territory

Current average fuel price ($/litre)

Current average fuel cost ($/km)

Oct 1 2021 Fuel update ($/litre)

Jul 1 2021 Fuel update ($/litre)

Apr 1 2021 Fuel update ($/litre)

Jan 1 2021 (Annual Report) ($/litre)

Alberta

$1.358

$0.113

$1.306

$1.191

$1.007

$0.990

British Columbia

$1.582

$0.132

$1.605

$1.476

$1.270

$1.228

Manitoba

$1.363

$0.114

$1.293

$1.198

$0.994

$0.983

New Brunswick

$1.408

$0.117

$1.335

$1.241

$1.028

$0.971

Newfoundland and Labrador

$1.568

$0.131

$1.495

$1.409

$1.212

$1.093

Northwest Territories

$1.505

$0.174

$1.454

$1.328

$1.204

$1.184

Nova Scotia

$1.384

$0.115

$1.324

$1.247

$1.023

$0.940

Nunavut

$1.113

$0.129

$1.113

$1.108

$1.104

$1.104

Ontario

$1.410

$0.117

$1.340

$1.252

$1.073

$1.017

Prince Edward Island

$1.402

$0.117

$1.339

$1.251

$1.051

$0.987

Quebec

$1.461

$0.122

$1.367

$1.280

$1.111

$1.053

Saskatchewan

$1.366

$0.114

$1.290

$1.222

$1.025

$1.018

Yukon

$1.559

$0.181

$1.471

$1.358

$1.221

$1.199

 

Gas prices in Nunavut are typically set for a full calendar year and rarely exhibit any changes. The latest change occurred on April 1st, 2021, and the Territorial average was determined to be $1.113 for the current study.

For illustration purposes, the following Graph displays gasoline prices for the main metropolitan areas for a one-year period (November 2020 - November 2021).

Graph showing gasoline prices - Nov 2020 - Nov 2021

Also, for illustration purposes, the following Graph displays crude oil prices for three benchmarks – WTI (West Texas Intermediate), Brent and WCS (Western Canadian Select) for a one-year period (November 2020 - November 2021).

Graph showing crude oil prices - Nov 2020 - Nov 2021

5.1.3     Fuel consumption

For each vehicle under study, fuel consumption figures were extracted from two main sources, namely Natural Resources Canada’s EnerGuide and the industry’s vehicle pricing and specification standard tool, AutoQuote. For models where 2022 model year figures were not available, 2021 figures with similar engine sizes were used. These figures were correlated back to last year’s consumption figures to check for consistency. Fuel consumption figures are determined by vehicle manufacturers, based on standardized tests, and are published for both city driving and highway driving. For Battery-Electric and Plug-in Hybrid Electric vehicles, the EnerGuide provides figures for fuel consumption by using a litre-equivalent (Le/100 km) system, thus facilitating the comparison with conventional fuel vehicles.

In Provinces where the majority of the population lives in large urban centres (e.g., Ontario) vehicles are driven more under city-driving conditions rather than highway-driving conditions. In light of this fact, the percentage of city versus highway driving has been referenced to a 55/45 city/highway split, consistent with the methodology used by the EnerGuide. On the other hand, for the Territories, a reversed 30/70 city/highway split was factored in, due to the predominantly rural character of the Territories and long distances to be covered.

The following table gives average fuel consumption figures by class of vehicle, in litres of gasoline per hundred kilometres:

Combined fuel consumption
(l/100 km)

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrid

Pick-up Truck

Weighted average

Provinces

7.1

7.6

10.7

8.5

11.0

3.0

-

8.3

Territories

-

-

-

8.1

10.2

-

11.2

9.7

 

5.1.4     Calculation of fuel expenses

Based on an average of 20,000 kilometres per year and following the methodology described above, the study calculated average fuel costs, per Province or Territory, for all vehicles under study. These numbers were weight-averaged according to population to yield individual fuel costs figures for each Province or Territory.

Fuel contributes on average $0.119 per kilometre to total operating costs, ranging from $0.113 in Alberta to $0.181 in the Yukon.

5.2     Vehicle Maintenance Expenses

In order to keep a vehicle in proper running condition and respect all driving safety requirements, a vehicle must be adequately maintained. Vehicle maintenance involves the following:

5.2.1     Preventative maintenance

Preventative maintenance includes, but is not limited to, the following:

Costs of preventative maintenance were estimated based on consultation with specialized garages and qualified mechanics in order to determine the frequency and costs for parts and labour. Sales taxes apply to all preventative maintenance costs.

5.2.2     Projected costs of repairs not covered by manufacturer warranty

Since the current study is considering retention periods of four and five years, a certain cost for projected repairs must be taken into account. Repairs due to accidents are covered by insurance and are reflected in insurance premiums costs. Most manufacturers offer warranties of up to 3 years or 60,000 kilometres (with the exception of Kia, Hyundai, Volkswagen, Mitsubishi and Mazda, which offer longer warranties). Beyond this period or mileage, any mechanical system that breaks down will incur a direct cost to the owner. Repairs not covered by manufacturer warranty have been accounted for in the present study accordingly.

5.2.3     Tires

The various vehicles under study have different tire requirements, mostly due to different rim sizes. All new vehicles come with a set of standard all-seasons tires. However, if only one set of tires is used, they wear out and need to be replaced, on average, after 60,000 kilometres. This implies that at least one new set of tires must be purchased for both four- and five-year retention periods.

For the purpose of this study, average quality all-seasons tires were considered. Costs of tires vary between $894 and $1,330 for a set of four with installation included, mainly depending on the type and size, plus applicable taxes.

5.2.3.1       Adjustments for Quebec and British Columbia

The Province of Quebec mandates the use of winter tires for all light-duty vehicles, for the period between December 1st and March 15th. In order to reflect this requirement a 50% increase in cost of tires was factored into the calculations. This accounts for purchasing an additional set of winter tires while offsetting the need to purchase another set of all-season tires for the four-year retention period studied but not necessarily for the five-year period.

In British Columbia, certain roads, especially in mountainous areas, mandate the use of winter tires, usually between October 1st and March 31st. A 25% increase in costs of winter tires was factored in the calculations to account for this requirement, in order to reflect the fact that winter tires are only used by a certain portion of vehicles registered in this Province.

5.2.4     Miscellaneous maintenance expenses

There are other common expenses related to maintaining a vehicle that do not fall under the previous three categories, but which are necessary for safety as well as aesthetic reasons. The present study allocated a $138 per year allowance for miscellaneous costs such as windshield washer fluid, occasional car wash and polish, light bulbs etc.

5.2.5     Total costs related to vehicle maintenance

Total maintenance costs were calculated for every Province and Territory. Costs are higher for Quebec mainly due to winter tire regulations. Costs for the three Territories are also higher primarily due to the extra equipment needed to support driving conditions in the North, as detailed in Section 6. Costs are lower for the Province of Alberta due to the fact that there is no provincial sales tax applicable.

The following five tables give a full break-down of vehicle maintenance costs in dollars per kilometre, by vehicle class as well as four and five year retention periods, split by preventative maintenance, repairs, tires, miscellaneous and maintenance sales tax, as well as weighted averages according to vehicle sales:

PREVENTATIVE
MAINTENANCE

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrid

Weighted Average*

4–yr ownership

$0.049

$0.049

$0.054

$0.050

$0.055

$0.040

$0.050

5–yr ownership

$0.054

$0.054

$0.059

$0.055

$0.059

$0.044

$0.055
       

$0.053

 ---

REPAIRS

Compact

Mid-Size

Minivan

Small
Crossover/
SUV

Medium
Crossover/
SUV

Battery Electric/
Plug-in Hybrid

Weighted
average*

4-yr ownership

$0.010

$0.010

$0.012

$0.010

$0.011

$0.007

$0.010

5-yr ownership

$0.023

$0.026

$0.029

$0.025

$0.028

$0.021

$0.025
       

$0.018

 ---

TIRES

Compact

Mid-Size

Minivan

Small
Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrid

Weighted average*

4-yr ownership

$0.013

$0.015

$0.016

$0.016

$0.019

$0.015

$0.015

5-yr ownership

$0.010

$0.012

$0.012

$0.012

$0.015

$0.012

$0.012
       

$0.014

 ---

MISCELLANEOUS

Compact

Mid-Size

Minivan

Small
Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrid

Weighted average*

4-yr ownership

$0.007

$0.007

$0.007

$0.007

$0.007

$0.007

$0.007

5-yr ownership

$0.007

$0.007

$0.007

$0.007

$0.007

$0.007

$0.007
       

$0.007

 ---

MAINTENANCE
SALES TAX

Compact

Mid-Size

Minivan

Small
Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrid

Weighted average*

4-yr ownership

$0.010

$0.010

$0.011

$0.010

$0.011

$0.008

$0.010

5-yr ownership

$0.012

$0.012

$0.013

$0.012

$0.013

$0.010

$0.012
       

$0.011

* Note that the total weighted averages are rounded to 3 decimals.

6       Operational Costs in the Territories

In order to accurately reflect actual costs of operating vehicles in the three Canadian Territories, the analysis required a different approach than for the ten Provinces. The Territories are mostly rural and driving conditions are harsher, especially in the wintertime. This means that prevalently larger vehicles are used with winter-adapted equipment and therefore the costs for maintenance, tires, fuel and specialized equipment are higher.

This section describes the methodology used for the Territories as well as highlights where it differs from the methodology used for the ten Provinces.

6.1     Vehicle Selection for the Territories

The nature of the climate and road conditions in the three Territories is considerably different than for the ten Provinces. Due to this fact, as well as the harsh winter driving conditions that drivers face in the North, the automotive landscape has a different make-up, and as a result trucks and crossovers/SUVs are significantly favoured over compact cars, mid-size sedans or minivans. Following this rationale, the present study selected three vehicle classes that were deemed representative for the Territories, same as in the previous Annual Report (November 2020, for publication on January 1st, 2021):

The study kept the vehicles studied in the small and medium crossover/SUVs categories, added the five most sold pick-up trucks in the truck category and eliminated the compact, mid-size, minivan and battery electric/plug-in hybrid electric vehicle classes.

Following is a table listing the vehicles studied for the Territories, as well as the class they belong to and the weight assigned to each according to recent Canadian sales:

Make

Model

Class

Weight for Territories

2022 Model Year Pricing*

Toyota

RAV4

Small Crossover/SUV

9.3%

$32,550

Honda

CR-V

Small Crossover/SUV

7.5%

$33,440

Nissan

Rogue

Small Crossover/SUV

4.5%

$32,958

Mazda

CX-5

Small Crossover/SUV

3.8%

$32,650

Ford

Escape

Small Crossover/SUV

3.8%

$32,294

Hyundai

Tucson

Small Crossover/SUV

3.7%

$31,624

Hyundai

Kona

Small Crossover/SUV

3.5%

$25,824

Subaru

CrossTrek

Small Crossover/SUV

3.3%

$27,595*

Vokswagen

Tiguan

Small Crossover/SUV

2.7%

$34,845

Nissan

Kicks

Small Crossover/SUV

2.4%

$21,728

Toyota

Highlander

Medium Crossover/SUV

2.8%

$46,350

Jeep

Wrangler

Medium Crossover/SUV

2.3%

$42,035

Jeep

Grand Cherokee

Medium Crossover/SUV

2.2%

$55,140

Ford

Explorer

Medium Crossover/SUV

2.2%

$47,804

Hyundai

Santa Fe

Medium Crossover/SUV

2.1%

$35,424

Toyota

4Runner

Medium Crossover/SUV

1.2%

$49,110

Ford

Bronco Sport

Medium Crossover/SUV

1.0%

$34,594

Honda

Pilot

Medium Crossover/SUV

1.0%

$51,490

Dodge

Durango

Medium Crossover/SUV

0.8%

$51,060*

Chevrolet

Traverse

Medium Crossover/SUV

0.8%

$41,398

Ford

F-Series

Truck

15.5%

$49,650

Ram

P/U

Truck

9.6%

$53,040

GMC

Sierra

Truck

7.5%

$52,198

Chevrolet

Silverado

Truck

4.6%

$50,798

Toyota

Tacoma

Truck

2.1%

$44,150

* Note: The current study used 2021 model-year pricing for vehicles for which prices were not yet available for the 2022 model-year.

It should be noted that by using the above vehicle classes and models studied for the Territories, overall ownership costs as well as vehicle maintenance costs are higher than for the Provinces.

6.2     Other Operating Cost Adjustments for the Territories

The methodology to calculate fixed and variable expenses for the Territories remained the same as for the Provinces. However, by virtue of using different vehicle classes, total costs are higher than for the Provinces.

The Territories usually display more elevated costs for fuel due to the higher costs of transportation and servicing. At the same time, by adding pick-up trucks and eliminating the more fuel-efficient compact and mid-size classes, overall fuel consumption is also higher than for the ten Provinces.

In terms of vehicle maintenance, adjustments were also made to reflect the extra equipment necessary for safe driving in the North, as well as use of special off-road or winter tires. The extra equipment that most acutely influences total maintenance costs for the Territories includes, but is not limited to, winter preparation packages, specialized tires, off-road survival kits and specialized signaling and communication devices, use of special engine oils and other freeze resistant liquids, as well as increased idling. For this reason, repair costs were increased by 25%, tire costs by 50% and fuel costs by 20% for the Territories.

As discussed in Sections 4.1.7 and 4.1.9, costs of ownership decreased slightly across Canada due to a reduced supply of new vehicles and the subsequent increase in resale prices but were particularly lower for the Territories due to the disproportional increase in resale values of Crossover/SUVs and Trucks.

7       Operating Cost Summary and Recommendations

We recommend continuing the practice of reimbursing government-requested personal vehicle use on the basis of both fixed and variable expenses, referred to as the Travel Rate. At the same time, we recommend that reimbursement of employee-requested personal vehicle use be based only on variable expenses, referred to as the Commuting Rate. This is consistent with current practice. All rates have been rounded up to the nearest 0.5 cents.

The following table provides calculated evaluations for both the Travel and Commuting Rates, as well as rates determined in the previous Annual Report (November 2020, for publication on January 1st, 2021) and the latest Fuel Update (August 2021, for publication on October 1st, 2021), for comparison.

2022 Reimbursement Schedule (in dollars per kilometre)

 

Travel Rate

Commuting Rate

Province/Territory

Current Annual Report

Oct 1 2021 Fuel Update

Jan 1 2021 Annual Report

Current Annual Report

Oct 1 2021 Fuel Update

Jan 1 2021 Annual Report

Alberta

$0.515

$0.510

$0.485

$0.210

$0.205

$0.180

British Columbia

$0.535

$0.560

$0.525

$0.240

$0.240

$0.210

Manitoba

$0.515

$0.520

$0.495

$0.215

$0.210

$0.185

New Brunswick

$0.545

$0.545

$0.515

$0.220

$0.215

$0.185

Newfoundland and Labrador

$0.575

$0.580

$0.545

$0.235

$0.230

$0.195

Northwest Territories

$0.620

$0.645

$0.615

$0.295

$0.290

$0.260

Nova Scotia

$0.550

$0.550

$0.520

$0.220

$0.215

$0.185

Nunavut

$0.570

$0.605

$0.605

$0.250

$0.250

$0.250

Ontario

$0.575

$0.575

$0.550

$0.220

$0.215

$0.190

Prince Edward Island

$0.530

$0.530

$0.500

$0.220

$0.220

$0.190

Quebec

$0.550

$0.550

$0.525

$0.235

$0.225

$0.200

Saskatchewan

$0.505

$0.515

$0.495

$0.215

$0.210

$0.185

Yukon

$0.600

$0.630

$0.595

$0.300

$0.295

$0.260

 Note: All figures were rounded up to the nearest half-cent.

The current Travel Rates (for publication on January 1st, 2022) show moderate variations versus the Travel Rates from the previous Fuel Update (August 2021, for publication on October 1st, 2021), ranging from a decrease of 3.5 cents per kilometre in Nunavut to an increase of 0.5 cents in Alberta. Correspondingly, as compared to the rates published in the previous Fuel Update (August 2021, for publication on October 1st, 2021), Commuting rates have ranged between no change to an increase of 1.0 cent per kilometre in Quebec (due to slightly higher-than-average gas price increases in this Province).

Year-over-year, as compared to the previous Annual Report (November 2020, for publication on January 1st, 2021), Travel Rates have varied between a decrease of 3.5 cents per kilometre in Nunavut to an increase of 3.0 cents per kilometre in Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. Correspondingly, the Commuting Rates varied between no change in Nunavut to an increase of 4.0 cents in Newfoundland and Labrador and the Yukon.

For illustrative purposes, the following chart provides a cost component comparison by Province and Territory for Travel Rates:

Graph of cost component comparison by province and territory for travel rates

In conclusion, overall, both the Travel and Commuting Rates have varied moderately across Canada as compared to the previous Fuel Update (August 2021, for publication on October 1st, 2021). The main factors that led to a decrease in vehicle-related costs for most Provinces and especially for the Territories are elevated vehicle resale rates, due to a shortage of new vehicles and disruptions in the supply chain. In certain provinces (e.g., Alberta, New Brunswick and Prince Edward Island), this overall decrease in vehicle depreciation was offset by increased insurance premium costs. On the other hand, insurance cost reductions by the public insurers in British Columbia, Saskatchewan and, to a lesser extent Manitoba, added to the decreased costs of ownership. All other cost components had only a minimal effect on reimbursement rates. However, even though gasoline prices have generally increased across Canada, this was not the case in British Columbia, which registered an overall decrease and Nunavut, where prices remained constant.

While most other cost components remain fairly constant over the course of a year, fuel prices fluctuate significantly on a daily basis. With the continued volatility of the energy markets, determined by global factors that are hard to forecast, it is difficult to make any prediction regarding future gasoline prices. Therefore, fuel price updates will be carried out every three months. All future changes in fuel prices and sales taxes will be reflected in the subsequent Fuel Updates.