This article explores four factors that make car ownership a less appealing proposition. The lesson plan aims to show students the hidden costs of purchasing a car.

Getting Started

Appropriate Subject Area(s):

Personal finance, public finance

Key Questions to Explore:

  • What cost should students consider before purchasing a car?
  • What financing options are available to young adults?
  • Why do governments charge highway tolls? Which government priorities are achieved by charging highway tolls?
  • What cost savings will exist for commuters who give up their cars for cheaper alternatives?
  • What are the disadvantages of not owning a car?

New Terminology:

Asset and liability, toll roads, salvage value, useful life, carbon tax


  • Asset: An economic resource owned by an individual with an expectation that it will provide a future economic benefit.
  • Liability: An obligation (i.e. debt or expense) which an individual has little or no discretion to avoid.
  • Useful life: The estimated lifespan of a depreciating asset, prior to obsolescence.
  • Salvage value: This refers to the estimated resale value of an asset at the end of its useful life.
  • Depreciation: This refers to the loss of market value a given asset suffers over its useful life due to wear and tear or the emergence of better substitutes.

Materials needed:

Study and Discussion Activity

Introduction to lesson and task:

Numerous benefits and costs come with purchasing a car. The initial purchase remains the biggest hurdle for most; however, as this article shows, the cost of maintaining and using a car is rising.

Four costs you should consider prior to purchasing or leasing a car:

  1. More toll Roads are coming: The Mayor of Toronto, John Tory, recently announced his plan to charge tolls on the Don Valley Parkway and the Gardiner Expressway. If the tolls charges are successfully implemented, other cities within Canada will probably follow Toronto’s lead. This will significantly increase the cost of owning a car in Canada.
  2. Gasoline prices are going to rise: The government is looking to implement a carbon tax, which could increase the cost of gasoline by $0.11 (approximately an 11% increase on current gasoline prices, given the average price of $1.02/litre). The recent OPEC deal struck by oil-producing nations to reduce oil supply in the coming months also points to a future rise the price of gas.
  3. High Interest on car loans: Prospective car buyers must be prepared to dedicate a substantial portion of their income – on average 20% of their annual income – to purchase a car. According to J.D. power and Associates, 56% of new vehicle loans have a term of seven or more years. Taking into account the additional operating costs that come with owning a vehicle, the purchase of a car will certainly make it more difficult for individuals to maintain robust savings and investments. Longer financing terms will likely increase the debt to disposable income ratio of households in Canada, which is currently $1.68: $1.
  4. What you buy today could be obsolete tomorrow: Due to constant innovation, better substitutes which render current models out-dated become available every year. For example, within the past five years we have witnessed a rise in hybrid and electric cars, and we are on the cusp of driverless cars becoming mainstream. The innovation we are witnessing in the automobile industry makes it riskier to sign up for long-term financing contracts today.

This topic is extremely relevant to high school students who aspire to own a car in the near future. Given the significant costs involved in purchasing a car, it is important to enlighten your students on the total costs involved with a car purchase.

The total cost of owning a car includes both the initial purchasing cost and the operating costs.

Purchasing cost (Current) Operating Cost (Future)
Initial Purchase Price Gasoline
Financing cost Maintenance and Repairs
Registration and Title cost Replacement/Winter Tires
Sales tax and GST/HST (13%) Insurance
Parking costs and Tolls fees

Action (lesson plan and task):

  • Survey the class by asking how many students plan on purchasing cars in the near future.
  • Ask your students to state what car they wish to purchase, in the near future. (Advise them to be realistic.)
  • Look up the list price of the most popular answer on the internet.
  • Ask your students to anticipate some additional cost that must be incurred to acquire the car.
  • Ask your students to state some operating costs that must be incurred to ensure their cars function properly.

Numeric Example

  • Ask your students to calculate the purchasing cost of a Nissan Altima, which includes the following costs (ignore discounting):

Purchasing Cost

    • Financing cost: $570/month.
    • HST: 13%.
    • Registration cost: Vehicle permit ($60), Licence Plate ($45), Licence Plate Sticker ($60), and Drive Clean Emission test ($30).
    • Answer: Total cost involved: ($570*12) + ($6,840*.13) + $60 + $45 + $60 + $30 = $7,924.20
  • Ask your students to calculate the annual operating cost of a Nissan Altima, which includes the following costs:

Operating Cost

    • Gasoline: Average annual mileage (20,000 km) and gas price ($1.02/litre). [Assume fuel consumption of this Nissan is 8.5 litres/100 km)
    • Depreciation and maintenance ($6,739)
    • Insurance ($1,904).
    • Answer: (20,000*(8.5/100)) + $6,739 + $1,904 = $10,343
    • Total cost of owning a car (1st year) = $10,343 + $7,924.20 = $18,267
  • Ask students to state the reasons governments charge toll fees on highways.
  • Ask your students to assume that the government’s goal is to reduce highway congestion and fight global warming. Given this assumption, is the proposed $2 toll too low to achieve this goal?
  • Ask students to assume the goal of tolls is to augment city revenues. Given this assumption, ask your students to state the major risk provincial governments will face if they set the toll fee much higher than $2.

Answer: too many individuals might switch to public transportation or other alternatives, which will leave the government with less revenue from the tolls.

  • Ask your students to state some alternatives modes of transportation.
  • Finally, ask your students to state the major risk of signing up for a long-term financing contract, with all the innovation happening in the automotive industry.

Consolidation of Learning:

  • Ask students to:
    • research the annual cost of using public transportation
    • calculate the potential cost savings.

Sample Answer
Example for students who use the TTC:

    • Total cost for students is $1,233 annually. ($102.75*12 = $1,233/Year)
    • This amount is reduced to $1,048.05 [1233*(1-15%)] after deducting public transportation federal tax credit of 15%.
    • Total annual cost savings in comparison to buying a car: $18,267 – $1,048.05 = $17,218.95.
Success and Additional Learning

Success Criteria:

  • After completing this lesson plan, students should become aware of the hidden costs of purchasing an automobile.

Confirming Activity:

  • Ask students to develop a savings plan to purchase a car following the template listed below:
    • Estimate costs of the car you want
    • Identify the sources of money to help you cover the cost
    • Set your total savings goal.
    • Develop a savings plan.