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CFS Annual Report - 2021

Reimbursement for Business Use of Personal Vehicles
Model Year 2021

Study prepared for
The Treasury Board of Canada Secretariat

by Corporate Fleet Services

November 2020

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 2021 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 2021 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 $0.525 per kilometre, as compared to $0.520 in the previous Fuel Update (August 2020, for publication on October 1st 2020) and $0.535 in the previous year Annual Report (November 2019, for publication on January 1st 2020). An overall decrease in fuel prices was counterbalanced by a slight increase in insurance premiums and maintenance costs.

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

$0.237

Depreciation

$0.179

Interest

$0.019

Acquisition Sales Tax

$0.039

Registration

$0.007

Registration

$0.007

Insurance

$0.088

Insurance

$0.088

Fuel

$0.090

Fuel

$0.090
Maintenance $0.100

Preventative Maintenance

$0.052

Repairs

$0.017

Tires

$0.013

Miscellaneous

$0.007

Maintenance Sales Tax

$0.011

TOTAL

$0.522

 

$0.522

 

The largest component of vehicle operating expenses is ownership (encompassing depreciation, interest and acquisition sales tax), which accounts for 45.4% of total costs, followed by maintenance expenses at 19.2%.

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 2019, for publication on January 1st 2020) 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 2019, for publication on January 1st 2020). 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

2. Variable 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 34.3%
Fuel 17.2%
Insurance 16.9%
Interest 3.6%
Maintenance Sales Tax 2.1%
Preventative Maintenance 10.0%
Registration 1.3%
Repairs 3.3%
Tires 2.5%
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

2021 Model Year Pricing*

Honda

Civic

Compact

7.1%

$25,070

Toyota

Corolla

Compact

5.2%

$25,120

Hyundai

Elantra

Compact

3.6%

$22,324*

Volkswagen

Golf

Compact

2.3%

$29,305

Kia

Forte

Compact

2.2%

$22,840

Mazda

3

Compact

2.1%

$26,250

Volkswagen

Jetta

Compact

1.7%

$27,430

Kia

Soul

Compact

1.2%

$24,790

Nissan

Sentra

Compact

1.1%

$23,668

Subaru

Impreza

Compact

0.9%

$26,470

Toyota

RAV4

Small Crossover/SUV

8.4%

$32,190

Honda

CR-V

Small Crossover/SUV

6.3%

$33,545*

Hyundai

Kona

Small Crossover/SUV

4.2%

$25,124

Nissan

Rogue

Small Crossover/SUV

3.9%

$32,628

Ford

Escape

Small Crossover/SUV

3.8%

$31,949

Mazda

CX-5

Small Crossover/SUV

3.6%

$31,950

Hyundai

Tucson

Small Crossover/SUV

3.6%

$29,924

Subaru

CrossTrek

Small Crossover/SUV

2.2%

$27,595

Kia

Sorento

Small Crossover/SUV

2.2%

$32,790*

Nissan

Kicks

Small Crossover/SUV

2.2%

$21,228*

Toyota

Camry

Mid-Size

1.7%

$29,020

Honda

Accord

Mid-Size

1.0%

$30,375*

Chevrolet

Malibu

Mid-Size

0.5%

$27,198

Hyundai

Sonata

Mid-Size

0.4%

$28,974

Volkswagen

Passat

Mid-Size

0.3%

$32,710

Nissan

Altima

Mid-Size

0.2%

$31,328

Subaru

Legacy

Mid-Size

0.2%

$28,420

Mazda

6

Mid-Size

0.2%

$29,400

Kia

Optima

Mid-Size

0.1%

$30,190*

Chrysler

Grand Caravan

Minivan

3.9%

$34,740*

Toyota

Sienna

Minivan

1.2%

$37,590*

Honda

Odyssey

Minivan

1.0%

$44,645

Kia

Sedona

Minivan

0.6%

$34,090

Chrysler

Pacifica

Minivan

0.3%

$46,690

Jeep

Wrangler

Medium Crossover/SUV

3.2%

$39,785

Jeep

Grand Cherokee

 Medium Crossover/SUV 2.5% $50,090

Ford

Explorer

Medium Crossover/SUV

2.5%

$47,449

Hyundai

Santa Fe

Medium Crossover/SUV

2.1%

$34,374*

Toyota

Highlander

Medium Crossover/SUV

2.0%

$45,490

Honda

Pilot

Medium Crossover/SUV

1.2%

$44,130

Toyota

4Runner

Medium Crossover/SUV

0.9%

$50,510

Chevrolet

Traverse

Medium Crossover/SUV

0.9%

$41,098

Ford

Expedition

Medium Crossover/SUV

0.8%

$60,375

Dodge

Durango

Medium Crossover/SUV

0.7%

$49,390

Toyota

Prius Prime

Battery Electric/Plug-in Hybrid

0.8%

$34,920

Hyundai

Kona EV

Battery Electric/Plug-in Hybrid

0.7%

$46,824

Chevrolet

Bolt

Battery Electric/Plug-in Hybrid

0.6%

$46,798

Mitsubishi

Outlander PHEV

Battery Electric/Plug-in Hybrid

0.4%

$45,648*

Hyundai

IONIQ BEV

Battery Electric/Plug-in Hybrid

0.3%

$43,224*

Nissan

Leaf

Battery Electric/Plug-in Hybrid

0.2%

$46,248

Hyundai

IONIQ PHEV

Battery Electric/Plug-in Hybrid

0.2%

$35,474*

Volkswagen

e-Golf

Battery Electric/Plug-in Hybrid

0.2%

$39,580*

Kia

Soul EV

Battery Electric/Plug-in Hybrid

0.2%

$44,690

Kia

Niro PHEV

Battery Electric/Plug-in Hybrid

0.1%

$37,790*

* Note: The current study used 2020 model-year pricing for vehicles for which prices were not yet available for 2021 model-year. All prices are given before applicable taxes.

Distribution of vehicles studied by class

Vehicle Class Distribution
Battery Electric/Plug-in Hybrid 4%
Compact 27%
Medium Crossover/SUV 17%
Mid-size 5%
Minivan 7%
Small Crossover/SUV 40%

 

Distribution of vehicles studied by brand name

Brand Name Distribution
Chevrolet 2.0%
Chrysler 4.3%
Dodge 0.7%
Ford 7.1%
Honda 16.5%
Hyundai 15.0%
Jeep 5.7%
Kia 6.7%
Mazda 5.8%
Mitsubishi 0.4%
Nissan 7.7%
Subaru 3.4%
Toyota 20.3%
Volkswagen 4.5%

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 published by Statistics Canada, there were a total of 8,514,952 light duty vehicles registered in Ontario in 2020, whereas in Prince Edward Island there were only 101,594 vehicles registered, 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, more than triple 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 2021 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 fourteen (14) vehicle models out of a total of 59. For these, 2020 model-year values were used, as in our experience these values vary only slightly from year to year and are generally reflective of 2021 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 2.9% 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 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 $5,357, depending primarily on each manufacturer’s marketing strategy, with an average of approximately $789. In general, rebates have seen a substantial decrease 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

Two Canadian Provinces (British Columbia and Quebec) currently offer government-funded rebates for the acquisition of a Battery Electric (BEV) or Plug-in Hybrid Electric vehicles (PHEV). Rebates offered by both Provinces range between $1,500 and $8,000 per vehicle.

Additionally, the Federal Government introduced an electric vehicle incentive in May 2019, 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 50km 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 applicable federal and provincial ‘green vehicle’ rebates, by model, at the time of the present study:

Area of application

Make

Model

Type

Rebate

British Columbia

Toyota

Prius Prime

PHEV

$1,500

Hyundai

Kona EV

BEV

$3,000

Chevrolet

Bolt

BEV

$3,000

Mitsubishi

Outlander PHEV

PHEV

$1,500
Hyundai IONIQ BEV

BEV

$3,000

Nissan

Leaf

BEV

$3,000

Hyundai

IONIQ PHEV

PHEV

$1,500

Volkswagen

e-Gol

BEV

$3,000

Kia

Soul EV

BEV

$3,000

Kia

Niro PHEV

PHEV

$1,500

Quebec

Toyota

Prius Prime

PHEV

$4,000

Hyundai

Kona EV

BEV

$8,000

Chevrolet

Bolt

BEV

$8,000

Mitsubishi

Outlander PHEV

PHEV

$4,000

Hyundai

IONIQ BEV

BEV

$8,000

Nissan

Leaf

BEV

$8,000

Hyundai

IONIQ PHEV

PHEV

$4,000

Volkswagen

e-Golf

BEV

$8,000

Kia

Soul EV

BEV

$8,000

Kia

Niro PHEV

PHEV

$4,000
Canada-Wide (Federal)

Toyota

Prius Prime

PHEV

$2,500

Hyundai

Kona EV

BEV

$5,000

Chevrolet

Bolt

BEV

$5,000

Mitsubishi

Outlander PHEV

PHEV

$2,500

Hyundai

IONIQ BEV

BEV

$5,000

Nissan

Leaf

BEV

$5,000

Hyundai

IONIQ PHEV

PHEV

$2,500

Volkswagen

e-Golf

BEV

$5,000

Kia

Soul EV

BEV

$5,000

Kia

Niro PHEV

PHEV

$2,500

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 cash purchases towards financing and leasing 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 an 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 8.99% for manufacturers’ subvented rates, while the third-party interest rates were approximated at 8.00%. The average interest rate for financing contracts was 1.87% while the lease rate was 3.87%. Overall, interest rates are lower as compared to the previous year, recording a 22% and 8% decrease 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%

Nova Scotia

15%

Ontario

13%

Prince Edward Island

15%

Quebec

14.975%

Saskatchewan

11%

Northwest Territories

5%

Nunavut

5%

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 were 6% higher than the previous year for 4-year and 4% for 5-year retention periods. The COVID-19 pandemic has had a significant impact on the supply and demand balance in the used vehicle market. On one hand, the economic challenges faced by consumers have led to a rising demand for used, less expensive vehicles. On the other hand, when the dealerships reopened in the summer after months-long mandatory closures, the supply was not able to meet the high demand, driving resale values higher. In addition, the lower Canadian dollar value as compared to the U.S. dollar continues to encourage remarketers from the U.S. to purchase used Canadian vehicles, further increasing the demand and, as a result, contributing to the rising prices.

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

$0.160

$0.196

$0.234

$0.179

$0.229

$0.203

$0.187

5-yr ownership

$0.144

$0.177

$0.211

$0.164

$0.214

$0.198

$0.171
             

$0.179

---

INTEREST

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrids

Weighted average

4-yr ownership

$0.008

$0.019

$0.035

$0.014

$0.027

$0.023

$0.017

5-yr ownership

$0.011

$0.022

$0.035

$0.019

$0.035

$0.026

$0.021
             

$0.019

---

ACQUISITION SALES TAX

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrids

Weighted average*

4-yr ownership

$0.033

$0.041

$0.050

$0.041

$0.058

$0.049

$0.043

5-yr ownership

$0.028

$0.034

$0.041

$0.034

$0.049

$0.041

$0.036
             

$0.039

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

4.1.9     Costs of ownership changes from the previous year

A general trend of increased MSRP prices and reduced rebates was counterbalanced by a proportional increase in resale prices and residual values. Additionally, lower interest rates available to consumers slightly decreased ownership costs. The overall result is that for the ten Canadian Provinces total average ownership costs stayed relatively the same as last year, with very minimal variation between Provinces and Territories.

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 $250 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

$146

$0.007

New Brunswick

$153

$0.008

Newfoundland and Labrador

$180

$0.009

Nova Scotia

$123

$0.006

Ontario

$120

$0.006

Prince Edward Island

$130

$0.007

Quebec

$250

$0.013

Saskatchewan

$68

$0.003

Northwest Territories

$83

$0.004

Nunavut

$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 a thorough 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 300 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 2020
Annual Report insurance premiums

Alberta

$1,875

$0.094

$1,700

British Columbia

$1,700

$0.085

$1,625

Manitoba

$1,350

$0.068

$1,425

New Brunswick

$1,350

$0.068

$1,325

Newfoundland and Labrador

$1,775

$0.089

$1,875

Nova Scotia

$1,525

$0.076

$1,450

Ontario

$2,225

$0.111

$2,275

Prince Edward Island

$1,125

$0.056

$1,050

Quebec

$1,175

$0.059

$1,125

Saskatchewan

$1,450

$0.073

$1,500

Northwest Territories

$1,875

$0.094

$1,850

Nunavut

$1,850

$0.093

$1,825

Yukon

$1,500

$0.075

$1,475

 

The values obtained through the present study are deemed to be reflective of the current reality for the established demographic. Insurance rates vary between $1,125 and $2,225, with a Canadian weighted average of $0.088 per kilometre.

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

Since late August, global crude prices have been exhibiting increased volatility. While the prices have actually been fluctuating by as much as 20% in either direction, overall, they have remained on average relatively constant. West Texas Intermediate (WTI) was at its highest point on the 26th of August at $43.39 USD per barrel and lowest on October 30th at $35.79 USD per barrel. As of the 20th of November, the WTI sits at $42.15 USD per barrel. Similarly, on August 25th Brent was at the three-month high of $45.86 USD per barrel, reaching the period’s lowest point on October 30th at $37.46 USD. As of the 20th of November, Brent was trading at $44.96 USD per barrel. The relative stabilization of the oil prices has happened mainly due to two contrary forces – a decelerating global economic recovery as well as the gradually rising crude oil production.

Over the three-month period, gasoline prices in Canada have exhibited similar, albeit more moderate fluctuations remaining fairly constant between mid-August to mid-November.

5.1.1.1      The Coronavirus Pandemic

The relative slowdown in the global spread of the COVID-19 caused by the coronavirus (SARS-CoV-2) observed during the summer months has been replaced by a significant increase in the infection rates since September, particularly across North America and Europe. By early November, a number of major economies had re-entered a total or partial national lockdown, including the UK, Italy, France and Germany. According to the Situation Report published by the World Health Organization (WHO), those efforts to curb the spread of the coronavirus appears to be working, with Europe reporting a decline in cases week-over- week by mid-November.

On the other hand, the situation in the U.S. has continued to worsen. As of November 18th, according to WHO’s report, the number of cases rose by more than 45% in a one-week period. Some states have introduced mask mandates and began enforcing more stringent measures against businesses that don’t follow social distancing requirements. Nevertheless, these measures are inconsistent across the U.S. In Canada, the upward trend, both in the number of cases and deaths, has also continued to persist despite public health measures that have been strengthened over the past several months.

On the positive side, COVID-19 vaccine trials are producing positive results that, nevertheless, still require review and approval by the regulators before distribution can begin. Although the vaccine is seen as an important addition for the fight against the coronavirus, other measures like social distancing and the use of masks are likely to continue for quite some time, dampening the economic activity.

5.1.1.2       Global Crude Oil Demand

While the initial negative impact of the pandemic was extensive, the economic data from the second quarter of the year was better than initially projected. Furthermore, the third quarter of the year saw reduced COVID-19 case numbers globally which led to significantly improved economic activity levels due to the easing of restrictions. As a result, the growth estimates, according to the latest World Economic Outlook (WEO) from October 2020 published by the International Monetary Fund (IMF), have mostly seen upward revisions as compared to the previous WEO Update from June 2020.

According to the WEO from October 2020, the global economy is expected to shrink by 4.4% this year, a significant improvement from the previous estimate of 4.9% published in June 2020. Next year, the IMF projects the global growth to be 5.2%. Similarly, the gross domestic product (GDP) of Advanced Economies is now projected to shrink by 5.8%, a significant improvement from the projected 8.0% in the June 2020 WEO Update. The upward revision reflects the better-than-foreseen economic results in the U.S. and Euro Area in the second quarter of this year.

The Euro Area is projected to contract by 8.3% this year, with the largest losses expected to be recorded in Spain (-12.8%), Italy (-10.6%) and France (-9.8%). The Euro Area economy contracted the most among major economies, with output in the second quarter falling by as much as 15% as compared to the pre-pandemic level. Similarly, it is projected that the U.S. economy will contract by 4.3% in 2020, a significant improvement from the 8.0% projected in the last report.

The IMF projections have also indicated an improvement for Canada, which is now expected to shrink by 7.1% in 2020 as compared to the 8.4% projection in the previous WEO Update from June 2020. Furthermore, the growth rate for 2021 has also improved slightly and now stands at 5.2%. For comparison, the latest Monetary Policy Report from the Bank of Canada from October 2020 estimates both the decline as well as the recovery to be more modest, projecting a 5.5% contraction in 2020 and a 4.0% growth in 2021. The Bank also reports that the energy exports remain weak amid low oil prices, soft external demand and ongoing structural challenges in the industry. Similar to the IMF, the Bank of Canada emphasizes that there is a high degree of uncertainty around these estimates due to the extraordinary nature and size of the economic shock caused by COVID-19.

In mid-November, fifteen (15) Asia Pacific nations including China, Japan, South Korea, New Zealand and Australia signed the world’s largest regional free-trade agreement. The agreement that has been in development for nearly a decade establishes the Regional Comprehensive Economic Partnership, or RCEP, encompassing 2.2 billion people or nearly a third of the world’s population as well as a combined gross domestic product (GDP) of $26.2 trillion USD, also about a third of the global economy. The trade pact is said to bolster pandemic-weakened economies by eliminating at least 92% of tariffs on traded goods, strengthening supply chains, and codifying new e-commerce rules.

Despite better-than-expected economic results, the global demand for crude oil has shrunk considerably, falling below 2013 levels. While the exact estimates vary by source, the overall consensus has been that the demand has been further suppressed due to resurgent coronavirus infection rates in the U.S. and Europe. Furthermore, the continuing COVID-19 containment measures that have adverse impacts on transportation and industrial fuel demand are expected to persist through mid-2021. According to the report from November 2020, the OPEC expects the world oil demand to contract by around 9.8 million barrels per day (mb/d) this year or 9.8% as compared to 2019, averaging 90.0 mb/d. Similarly, the International Energy Agency (IEA) downgraded its outlook for crude consumption in November 2020, now estimating a drop in demand by 8.8 mb/d or 8.8%, averaging 91.3 mb/d. In 2021, the demand is expected to recover, but still remain below the pre-pandemic levels of 2019, when the demand, by most estimates was around 100 mb/d.

After the sharp drop during the first months of the pandemic and the subsequent partial recovery, the OPEC's reference basket price (calculated as a weighted average of prices of crude oil produced by OPEC countries) has declined by 7.7%, averaging $40.08 USD per barrel in October as compared to $43.42 USD per barrel in July 2020. In a year-to-year perspective, the reference basket value has dropped by 33.1% as compared to $59.91 USD per barrel in October 2019.

The risks to the above projections remain unusually high. Forecasts rest on public health and economic factors that are inherently difficult to predict. There are many layers of uncertainty, including the path of the pandemic as well as the associated economic activity disruptions due to the required public health measures and any adjustment costs such restrictions impose on the economy either directly or indirectly. In addition, the effectiveness of the economic policy response and the evolution of financial sentiments can play an important role on the pathway to recovery.

5.1.1.3       Global Crude Oil Supply

The world-wide demand for gasoline, diesel, jet fuel and even heating oil remains depressed. However, the supply of crude has been on the rise over the last several months. The International Energy Agency (IEA) reported that more than a million barrels per day (mb/d) were added to the market in November as compared to the month prior because of two main factors – the U.S. supply recovery after the disruptions caused by the hurricane season, as well as a rapid increase of production in Libya.

Every year the hurricane season poses difficulties and disruptions for the oil industry from extraction to refining. This year has been the most active hurricane season on record with a total of 30 named storms, including 13 hurricanes. As a result, the offshore producers in the U.S. Gulf have faced a level of disruptions not seen in over a decade. The U.S. Gulf has nearly 1.9 mb/d of crude output capacity. During large hurricanes (such as Delta and Zeta this year), 85-90% of that capacity had to be shut off temporarily. On average, the producers have had to curtail about 110,000 b/d of production capacity as compared to about 20,000 barrels per day (b/d) in a typical season. On an annual basis, the U.S. Energy Information Administration (EIA) expects U.S. crude oil production to fall by about 0.8 mb/d or 6.7% in 2020 as compared to 2019 and a further 2.6% in 2021.

According to the Canada Energy Regulator, Western Canada produced an average of 4.4 mb/d of oil in 2019. Due to the collapse of global crude prices this last spring, 0.97 mb/d or more than 22% of that capacity was curtailed by mid-May. As of October, the producers have brought back online about 0.7 mb/d, thus only about 6.1% remains offline as compared to the last year.

Overall, the output produced outside of the OPEC+ coalition is expected to fall by 1.3 mb/d or just over 1% of the global supply this year as compared to 2019. This includes the reduced production in the U.S. and Canada.

In response to the demand shock induced by the COVID-19 pandemic in the spring, the OPEC+ coalition, including Russia, implemented a historic production output reduction by 9.7 million barrels a day (mb/d) or nearly 10% of global output on May 1st 2020. In accordance with the agreement and supported by the tentative economic recovery during the summer months, the production cuts were scaled back to 7.7 mb/d in August with further tapering planned for the next year.

Three OPEC countries, Iran, Libya, and Venezuela, have been exempt from the OPEC+ agreement. Internal military unrest in Libya had strangled the country’s oil production for much of the past year. However, with a signing of a truce at the end of October, Libya has increased its production from 100,000 b/d in August to 1.0 mb/d in November, adding about 1% of the global supply back onto the market.

Overall, the crude oil markets are imbalanced – the global demand has dropped by an estimated 8-9%, while the supply, on average, is only expected to reduce by 5-6% this year. As a result, the global inventory levels remain high, adding to the volatility of the global crude oil prices. E.g. Organization for Economic Co-operation and Development (OECD) stocks declined by a mere 4% between May and September – during the period of a significant economic recovery. The recent resurgence of the infections across Europe and the Americas as well as the subsequent lockdowns are expected to further weaken the global demand in the near future.

5.1.2     Gasoline prices across Canada

In 2020, gasoline prices in Canada have followed the global crude oil prices fairly closely. As the pandemic had a significant impact on the price of crude, a similar impact was observed on the prices of gasoline in March and April. Between May and August, both crude and gasoline were on an upward trend, regaining part of their losses and largely stabilizing over the past three months. As a result, the average price for gasoline in Canada has remained fairly constant between August and November 2020 at $1.054, with only a slight increase of 1.2 cents or 1.2% as compared to the previous Fuel Update (August 2020, for publication on October 1st 2020). In a year-to-year perspective, the gasoline prices, on average, are 12.1% lower than a year ago. This year, the end of the summer driving season as well as the arrival of the less-expensive winter-grade gasoline has had only a minor effect on prices at the pump.

Fluctuations in fuel prices across Provinces and Territories between mid-August and mid-November have been moderate, with the largest increases as compared to the previous Fuel Update (August 2020, for publication on October 1st 2020) being recorded in the Northwest Territories at 6.9% (7.6 cents) and Alberta at 5.1% (4.8 cents). A slight decrease in average prices was recorded in only two Provinces: British Columbia at 1.8% (2.2 cents) and Quebec at 0.4% (0.4 cents). Prices in Nunavut remained constant.

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, over 90% 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 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 17th to November 13th 2020) in order to better reflect current prices. Gasoline prices in Canada varied during this period between $0.883 in Sarnia, ON to $1.337 in Vancouver, BC, with a national average of $1.054.

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 2020 Fuel update ($/litre)

Jul 1 2020 Fuel update ($/litre)

Apr 1 2020 Fuel update ($/litre)

Jan 1 2020 (Annual Report) ($/litre)

Alberta

$0.990

$0.085

$0.942

$0.780

$0.987

$0.993

British Columbia

$1.228

$0.106

$1.250

$1.126

$1.365

$1.480

Manitoba

$0.983

$0.085

$0.972

$0.812

$1.041

$1.089

New Brunswick

$0.971

$0.084

$0.950

$0.888

$1.174

$1.185

Newfoundland and Labrador

$1.093

$0.094

$1.046

$0.964

$1.228

$1.225

Nova Scotia

$0.940

$0.081

$0.919

$0.820

$1.116

$1.133

Ontario

$1.017

$0.087

$1.011

$0.886

$1.143

$1.166

Prince Edward Island

$0.987

$0.085

$0.963

$0.863

$1.128

$1.151

Quebec

$1.053

$0.091

$1.057

$0.960

$1.202

$1.217

Saskatchewan

$1.018

$0.088

$0.989

$0.834

$1.080

$1.084

Northwest Territories

$1.184

$0.142

$1.108

$1.059

$1.306

$1.328

Nunavut

$1.104

$0.132

$1.104

$1.100

$1.115

$1.127

Yukon

$1.199

$0.144

$1.161

$1.158

$1.428

$1.429

 

Gas prices in Nunavut are typically set for a full calendar year and rarely exhibit any changes. The latest change occurred on April 1st 2020 and the Territorial average was determined to be $1.104 for the current study.

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 2021 model year figures were not available, 2020 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

7.2

7.8

11.4

8.6

11.2

3.5

-

8.6

Territories

-

-

-

8.1

10.4

-

11.2

10.0

 

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 $0.090 per kilometre to total operating costs, ranging from $0.081 in Nova Scotia to $0.144 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 $871 and $1,297 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 $135 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 four 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 and miscellaneous, 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

$0.047

$0.048

$0.053

$0.049

$0.054

$0.038

$0.050

5–yr ownership

$0.052

$0.052

$0.057

$0.054

$0.058

$0.042

$0.055
             

$0.052

 ---

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

$0.024

$0.027

$0.016

$0.024
             

$0.017

 ---

TIRES

Compact

Mid-Size

Minivan

Small
Crossover/
SUV

Medium Crossover/
SUV

Battery Electric/
Plug-in Hybrid

Weighted average*

4-yr ownership

$0.013

$0.014

$0.015

$0.015

$0.019

$0.014

$0.015

5-yr ownership

$0.010

$0.011

$0.012

$0.012

$0.015

$0.011

$0.012
             

$0.013

 ---

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

$0.009

$0.010

$0.011

$0.010

$0.011

$0.008

$0.010

5-yr ownership

$0.011

$0.012

$0.013

$0.012

$0.013

$0.009

$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 winter-time. 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 2019, for publication on January 1st 2020):

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

2021 Model Year Pricing*

Toyota

RAV4

Small Crossover/SUV

7.5%

$32,190

Honda

CR-V

Small Crossover/SUV

5.6%

$33,545*

Hyundai

Kona

Small Crossover/SUV

3.7%

$25,124

Nissan

Rogue

Small Crossover/SUV

3.5%

$32,628

Ford

Escape

Small Crossover/SUV

3.4%

$31,949

Mazda

CX-5

Small Crossover/SUV

3.2%

$31,950

Hyundai

Tucson

Small Crossover/SUV

3.2%

$29,924

Subaru

CrossTrek

Small Crossover/SUV

2.0%

$27,595

Kia

Sorento

Small Crossover/SUV

1.9%

$32,790*

Nissan

Kicks

Small Crossover/SUV

1.9%

$21,228

Jeep

Wrangler

Medium Crossover/SUV

2.9%

$39,785

Jeep

Grand Cherokee

Medium Crossover/SUV

2.2%

$50,090

Ford

Explorer

Medium Crossover/SUV

2.2%

$47,449

Hyundai

Santa Fe

Medium Crossover/SUV

1.9%

$34,374*

Toyota

Highlander

Medium Crossover/SUV

1.8%

$45,490

Honda

Pilot

Medium Crossover/SUV

1.1%

$44,130

Toyota

4Runner

Medium Crossover/SUV

0.8%

$50,510

Chevrolet

Traverse

Medium Crossover/SUV

0.8%

$41,098

Ford

Expedition

Medium Crossover/SUV

0.7%

$60,375

Dodge

Durango

Medium Crossover/SUV

0.6%

$49,390

Ford

F-Series

Truck

20.1%

$48,239

Ram

P/U

Truck

12.1%

$50,440

GMC

Sierra

Truck

7.5%

$50,998

Chevrolet

Silverado

Truck

7.3%

$50,598

Toyota

Tacoma

Truck

1.9%

$45,910

* Note: The current study used 2020 model-year pricing for vehicles for which prices were not yet available for the 2021 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.

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 2019, for publication on January 1st 2020) and the latest Fuel Update (August 2020, for publication on October 1st 2020), for comparison.

2021 Reimbursement Schedule (in dollars per kilometre)

 

Travel Rate

Commuting Rate

Province/Territory

Current Annual Report

Oct 1 2020 Fuel Update

Jan 1 2020 Annual Report

Current Annual Report

Oct 1 2020 Fuel Update

Jan 1 2020 Annual Report

Alberta

$0.485

$0.470

$0.475

$0.180

$0.175

$0.180

British Columbia

$0.525

$0.520

$0.540

$0.210

$0.210

$0.230

Manitoba

$0.495

$0.495

$0.505

$0.185

$0.180

$0.190

New Brunswick

$0.515

$0.505

$0.525

$0.185

$0.185

$0.205

Newfoundland and Labrador

$0.545

$0.545

$0.560

$0.195

$0.190

$0.205

Nova Scotia

$0.520

$0.510

$0.525

$0.185

$0.180

$0.200

Ontario

$0.550

$0.550

$0.565

$0.190

$0.185

$0.200

Prince Edward Island

$0.500

$0.490

$0.510

$0.190

$0.185

$0.200

Quebec

$0.525

$0.520

$0.535

$0.200

$0.200

$0.215

Saskatchewan

$0.495

$0.490

$0.500

$0.185

$0.185

$0.190

Northwest Territories

$0.615

$0.595

$0.620

$0.260

$0.245

$0.270

Nunavut

$0.605

$0.590

$0.595

$0.250

$0.245

$0.245

Yukon

$0.595

$0.580

$0.610

$0.260

$0.250

$0.285

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

The current Travel Rates (for publication on January 1st 2021) show minimal variations versus the Travel Rates from the previous Fuel Update (August 2020, for publication on October 1st 2020), ranging from an increase of 2.0 cents per kilometre in the Northwest Territories to no changes in Ontario, Manitoba and Newfoundland and Labrador. On the other hand, as compared to the rates published in the previous Fuel Update (August 2020, for publication on October 1st 2020), Commuting rates have ranged between an increase of 1.5 cents per kilometre in the Northwest Territories to no change in Quebec, British Columbia, New Brunswick and Saskatchewan.

Year-over-year, as compared to the previous Annual Report (November 2019, for publication on January 1st 2020), Travel Rates have varied between an increase of 1.0 cent in Alberta and Nunavut to a decrease of 1.5 cents in British Columbia, Newfoundland and Labrador, Ontario and the Yukon. Similarly, the Commuting Rates varied between an increase of 0.5 cents in Nunavut to a decrease of 2.5 cents in the Yukon.

In conclusion, overall both the Travel and Commuting Rates have either increased slightly or stayed constant across Canada as compared to the previous Fuel Update (August 2020, for publication on October 1st 2020). The main factors that led to a minimal increase in vehicle-related costs for most Provinces and Territories are slightly higher insurance and maintenance costs. All other cost components had only a minimal effect on reimbursement rates.

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.