Owning a car can cost much more than just your monthly payment. There are many factors that add to the cost of owning a car like how many miles a month you drive, fuel cost, insurance cost, maintenance expenses, and the cost of your vehicle. These costs will be different for each person, that’s why you need a personalized car ownership cost calculator that can handle all of these factors. This calculator will take into account all of your monthly expenses and give you the true cost of owning a vehicle so you can plan ahead and budget for your new ride.
What Are The Average Costs To Own A Car?
The average monthly cost to own a car in 2024 was $12,297 a year or $1,025 a month according to AAA. To break it down, the average person spends $10.13/mile on maintenance, $14.90/mile on fuel, $1,332/year financing their auto loan, $1,715/year on insurance, $815/year on registration, taxes, license renewals, etc. and loses $4,680/year in depreciation.
What Is Financing?
Financing is when you have monthly or bi-weekly payments for a vehicle instead of buying the vehicle outright. There is typically an added interest rate to the payment. The interest rate can fluctuate depending on economic conditions. There is two important terms you need to know when financing a vehicle, the principal and the interest. The principal is the amount you owe for the vehicle and the interest is the amount paid on top of the principal. The interest amount depends on your agreed upon interest rate.
What Is Depreciation?
Depreciation occurs when you pay the full value of a car upfront. Depreciation is the difference between what you paid for the car and what it’s worth now. New cars lose a certain amount of money every month as the price of that car declines in value. Other factors can affect the depreciation rate, such as the number of miles driven on the car, the condition of the car, how well maintained it is, and the car’s age. An average depreciation rate is typically 15% as cars depreciate significantly the first year (20%-25%), but much lower in the following years (~10%).
What Are The Costs Included In Owning A Car
There are several costs that come with car ownership:
- Insurance, Registration, Taxes, & License Fees: Insurance and registration costs will vary widely based on which state or province you are located. Taxes can include any sales taxes, state or provincial taxes that come with purchasing a car. Lastly, license fees are the fees that come with renewing your driver’s license.
- Fuel Costs: These are the costs that come with operating your vehicle and can vary widely by how much you drive. There are also the costs of fuel per gallon that can also vary widely by your region. The price of fuel can also depend on the grade of gas your car requires.
- Maintenance Costs: Like any machine, parts tend to wear down overtime and need replacement. These maintenance costs typically include the costs for a mechanic shop to maintain your vehicle. This includes parts and labour costs.
- Financing Costs: This is when you buy a vehicle, but pay in monthly installments. Your monthly payment includes both interest and principal that need to be paid. The amount of monthly interest you pay depends on your interest rate.
- Depreciation: This is the difference between the paid for cost of the car and what it is currently worth. Many factors can influence the current value of a vehicle, including the condition it is in, the number of miles, and how well maintained it is. Depreciation on a brand new car is significant for the first year, for used cars it is significantly less.
This includes everything you should factor into your monthly payment.
How To Use This Calculator
This free calculator is designed to compare the monthly operating costs of two vehicles. We will walk you through step-by-step how to operate this calculator in the list below:
Title
Input the Name of the two vehicles you’d like to compare.
Is This Financed Checkbox?
Check whether you are financing one vehicle or the other vehicle you are comparing it to. This will disable depreciation. You also won’t be able to enter a value into the financed box without the checkbox being ticked. If the financed checkbox is ticked, you won’t be able to enter anything into the depreciation input boxes or be able to input the vehicle value as this is used to calculate depreciation.
Miles Per Month
Input the number of miles that you typically drive every month, if you are unsure estimate on the higher side. This value should be the same for both vehicles, so input the same number in both vehicle sections.
Miles Per Gallon (MPG)
Input the stated miles per gallon of each vehicle into each of their boxes. If you don’t know where to find this, you can find this on each car manufacturer’s website. They should have a specifications section that states this information by model. If you can’t find this information, contact the dealership your are looking to buy the vehicle from.
Fuel Price
You can find this information from your local gas station. In the case of this calculator it is best to estimate on the higher end as these prices can fluctuate. Input the same number for both vehicles.
Insurance
input the monthly cost for your vehicle insurance. If you don’t have this information on hand, you can request a quote from an insurance company for the costs to insure each vehicle. If both cars are both roughly the same in value, input the same insurance value as this number will be a close approximation. If you would like to include any registration costs for the vehicles, you can divide the full year payment by 12 months and add it to the insurance monthly payment.
Maintenance
This is a little bit harder to estimate. If you are unsure what number to use and both costs are of a similar value. Then we recommend you use the average value of $10.13 per mile and multiply it by the number of miles you drive every month to get this value. If one car requires significantly more expensive parts and labour than another, you will want to factor in higher maintenance costs for the more expensive vehicle.
Financing Value
This will be disabled unless you check the financing box above. Input the monthly payment for each vehicle that is being financed into this box. This is used to help calculate your total monthly vehicle ownership costs.
Vehicle Value
This will be disabled if you check the financing box above. Input the cost of each vehicle into the calculator. This is used to calculate how much is lost every month in depreciation. If you have any taxes that are going to be paid on the vehicle, include these in this section as well.
Years Owned
Enter the number of years you plan to own each vehicle.
Depreciation Rate
This will be disabled if you check the financing box above. Enter the expected depreciation rate, we recommend using 15% a year as that is the typical average.
Tips To Reduce Costs
Here are some tips to help you reduce your monthly costs:
- Shop Around For The Best Rates: Insurance companies and mechanic shops have different rates, look around for the best prices in your local area. For the best insurance rates, you can look into using a broker to find you the best rates. For mechanic shops this one is much tricker, look around for a well rated mechanic with competitive pricing. You don’t want to be too frugal and choose a poorly rated mechanic shop as it can hurt you down the road with things not being repaired properly.
- Compare Fuel Prices: There are many apps that compare fuel prices in your local area. Make sure to use one of these to get the best price on gasoline.
- Drive Less: Need to go a really short distance? Consider walking or riding your bike.
- Depreciation costs: The more expensive vehicle you purchase – the higher your depreciation costs. This can make the ownership of your car overall more expensive.
- Vehicle Reliability: The more reliable your vehicle is, the less likely it is to breakdown or need constant servicing. Make sure you select a reliable vehicle model that doesn’t break the bank to help reduce maintenance costs.
- If You Have Experience Working on Cars: If you are a mechanic, or you have experience working on cars and are comfortable replacing these parts yourself. You can replace these parts and save on labour costs.
FAQs
Buying a used car can be significantly cheaper and save money. This is provided the vehicle was properly maintained and taken care of.
Depreciation is by far the largest expense when it comes to owning a car. Financing is perceived as the largest expense in car ownership. However, the loss in resale value from depreciation is usually much higher.
Trucks and SUVs tend to cost more to fuel and insure, while luxury vehicles carry higher maintenance and repair costs. EVs can lower fuel and maintenance costs but may have higher insurance premiums and upfront purchase prices.
The more you drive, the faster your car depreciates, wears down, and consumes fuel, all of this raises your total ownership cost. High mileage also lowers resale value, which has a huge impact on depreciation and the resale value.
This calculator provides estimates only. Actual loan terms may vary. Consult with lenders for exact figures. Not financial advice. Please read our full disclaimer here.