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Calculating the true cost of ownership: How luxury can be a better deal

Luxury auto makers have aggressively added to the entry-level end of their model lineups to attract younger, aspirational buyers that they hope will become brand loyal customers. While lower starting prices and attractive incentives have made monthly payments on luxury nameplates more affordable, the perception that luxury vehicles come with hidden and higher costs of ownership remain a barrier for many consumers.

The primary components when calculating total cost of vehicle ownership include insurance, fuel, interest charges, depreciation and maintenance. According to the Canadian Automobile Association (CAA), total ownership costs for an average compact car are approximately $9,500 annually. However, the cost to drive some new entry-level luxury crossovers may not actually be that much more.

For example, the cost to drive the 2017 Audi Q3 featured this week would be approximately $10,200 annually, including: $5,796 in lease payments, $2,500 in fuel costs (assuming 20,000 kilometres driven annually and $1.25 per litre), $1,422 in insurance costs (assuming a 35-year-old male in Toronto with a clean driving record) and up to $500 in other costs for miscellaneous maintenance and licensing. There would be no additional implied charge for depreciation necessary as the vehicle could be simply returned at the end of the lease with no further obligation. As well, the original vehicle warranty would likely cover any unscheduled maintenance issues during the assumed 48 month lease term.

In fact, the expected cost for insurance can actually be cheaper for some luxury models as compared to popular compacts. According to the insurance quote comparison website ShopInsuranceCanada.ca, the best available annual insurance rate for the 2017 Honda Civic LX and the 2017 Hyundai Elantra GL start at $1,648 and $1,566 respectively for a 35-year-old male in Toronto with a clean driving record. Surprisingly, both are more expensive to insure than any of the luxury crossover deals featured this week.

Volkswagen

2017 Audi Q3

Standard features include real leather seating with heated front seats, Xenon plus headlights with LED daytime running lights, power tailgate, rear-view camera with parking guides and a panoramic glass roof. Power comes from a 2.0-litre turbocharged four-cylinder engine capable of outputting 200 horsepower, and is available in both front-wheel-drive and all-wheel-drive variants. Fuel economy for a Q3 equipped with all-wheel-drive is rated at 11.9 litres/100 km in the city and 8.4 on the highway. The best available insurance rate for the 2017 Q3 starts at $1,422 annually, according to ShopInsuranceCanada.ca.

2017 Audi Q3 2.0 TFSI Quattro Komfort Tiptronic

  • MSRP: $37,100
  • Manufacturer Incentive: $750
  • Estimated Dealer Discount: $1,000
  • Freight, PDI, government fees: $2,235
  • Cash purchase price before tax: $37,585
  • Finance for 60 months at 1.9 per cent interest for $743 per month including tax (includes a $750 incentive and assumes zero down payment)
  • Lease for 48 months at 2.9 per cent interest for $483 per month including tax (includes a $750 incentive, assumes a 20,000 annual kilometre allowance and zero down payment)

Nissan

2017 Infiniti QX30

Standard features include 18-inch alloy wheels with run-flat tires, Nappa leather seating with heated front seats and a rear-view monitor. Power is provided by a 2.0-litre four-cylinder turbocharged engine capable of outputting 208 horsepower, and mated to your choice of front-wheel-drive or all-wheel-drive drivetrain. Fuel economy for the QX30 equipped with all-wheel-drive is rated at 10.6 litres/100 km in the city and 8.0 on the highway. Cash purchasers can take advantage of $4,250 in incentives (as compared to $2,500 in November) while finance and lease customers are eligible for a $750 rebate. The best available insurance rate for the 2017 QX30 starts at $1,304 annually, according to ShopInsuranceCanada.ca.

2017 Infiniti QX30 All Wheel Drive

  • MSRP: $38,490
  • Manufacturer Incentive: $4,250
  • Estimated dealer discount: $1,000
  • Freight, PDI, government fees: $2,135
  • Cash purchase price before tax: $35,375
  • Finance for 60 months at 2.28 per cent interest for $775 per month including tax (includes a $750 incentive and assumes zero down payment)
  • Lease for 48 months at 1.99 per cent interest for $551 per month including tax (includes a $750 incentive, assumes a 20,000 annual kilometre allowance and zero down payment)

Mercedes-Benz

2016 Mercedes-Benz GLA-Class

Standard equipment includes an enhanced on/off-road package which gives the vehicle superior capabilities in snow and in adverse driving conditions, 18-inch wheels (19-inch wheels available as an option) and Artico leather seating surfaces. Optional equipment include a panoramic sunroof, COMAND navigation system with Mercedes-Benz apps and a Harman Kardon LOGIC7 surround sound system. Power options include two four-cylinder turbocharged engines mated to all-wheel-drive drivetrains, with the GLA 250 capable of outputting 208 horsepower and the GLA 45 AMG variant capable of outputting 375 horsepower. Fuel economy for the GLA 250 is rated at 9.8 litres/100 km in the city and 7.6 on the highway. The best available insurance rate for the 2017 GLA 250 starts at $1,298 annually, according to ShopInsuranceCanada.ca.

2016 Mercedes-Benz GLA 250 4MATIC

  • MSRP: $38,000
  • Manufacturer Incentive: $1,800
  • Estimated dealer discount: $800
  • Freight, PDI, government fees: $2,215
  • Cash purchase price before tax: $37,615
  • Finance for 60 months at 0.9 per cent interest for $725 per month including tax (includes a $1,800 incentive and assumes zero down payment)
  • Lease for 45 months at 1.9 per cent interest for $536 per month including tax (includes a $1,800 incentive, assumes an 18,000 annual kilometre allowance and zero down payment)

Toyota

2017 Lexus NX

Standard features include keyless door handles, eco-friendly NuLuxe luxury seating surfaces and LED headlamps and tail lamps. Power options include a turbocharged four-cylinder engine capable of outputting 235 horsepower or a Lexus Hybrid Drive engine capable of outputting 194 net horsepower, with all-wheel drive standard on all models. Fuel economy is rated at 10.8 litres/100 km in the city and 8.8 on the highway for the NX 200t and 7.1 in the city and 7.7 on the highway for the NX 300h hybrid. The best available insurance rate for the 2017 NX 200t starts at $1,430 annually, according to ShopInsuranceCanada.ca.

2017 Lexus NX 200t 4WD

  • MSRP: $42,750
  • Manufacturer Incentive: $2,000 (applied after tax)
  • Estimated dealer discount: $2,000
  • Freight, PDI, government fees: $2,185
  • Cash purchase price before tax: $40,935
  • Finance for 60 months at 3.9 per cent interest for $855 per month including tax (includes a $2,000 incentive applied after tax and assumes zero down payment)
  • Lease for 48 months at 2.9 per cent interest for $564 per month including tax (includes a $2,000 incentive, assumes a 20,000 annual kilometre allowance and zero down payment)

Andrew Tai is CEO of Unhaggle.

Prices and incentives are effective as of January 3, 2017, but may be subject to change thereafter. Manufacturer incentives and pricing calculations are based on Ontario customers and subject to availability of inventory. Dealer discounts shown are estimates for illustrative purposes only, may vary by region and are given at the discretion of individual dealers. Please note that while every effort is made to ensure the information above is accurate at the time of publication, pricing, incentives and discounts are subject to change or discontinuation at any time. Consult your local dealership for details. Auto insurance quotes are based on estimates from ShopInsuranceCanada.ca and actual rates may vary based on vehicle, location and driver.

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