Car Cost of Ownership Calculator
About $888 a month, all in.
| Cost over 5 years | Total | Share |
|---|---|---|
| Depreciation — value the car loses | $23,296 | 44% |
| Insurance | $9,000 | 17% |
| Fuel — 12000 mi/yr at 25 MPG | $8,400 | 16% |
| Loan interest — principal is not a cost | $6,582 | 12% |
| Maintenance & repairs | $4,000 | 8% |
| Registration, tolls, parking | $2,000 | 4% |
| True total cost | $53,278 | 100% |
| Per year | $10,656 | — |
| Per month | $888 | — |
| Per mile | $0.89 | — |
| Car's value at the end not a cost — you keep it | $16,704 | — |
Depreciation is 44% of what this car costs you — $23,296 over 5 years, and the only line here that never appears on a statement. That is why the monthly payment is such a poor guide to what a car actually costs.
Note what counts as a cost and what does not. Only loan interest is a cost — the principal buys equity you recover when you sell, so counting the whole payment double-counts against depreciation. And depreciation is a real cost even if you pay cash: the car is worth less than you paid whether or not a lender is involved. Set the loan term to "paying cash" and watch the total barely move, because financing interest is usually a small share next to the value the car sheds on its own. Not included: tyres beyond routine maintenance, an extended warranty, or the opportunity cost of capital tied up in the car. Maintenance also rises sharply with age — a figure that is right for years one to three will understate years seven to ten considerably.
Add up depreciation, fuel, insurance, maintenance, and interest to find what a car really costs per year, per month, and per mile.
How to use this calculator
- Enter the purchase price, down payment, and financing terms — or set the term to "paying cash".
- Set how many years you will own it and your annual mileage. Both change the answer substantially.
- Add fuel economy and price, then your insurance, maintenance, and other annual costs.
- Adjust the depreciation rates if you know the specific model's behaviour — the depreciation calculator has profiles by category.
The formula
True cost = Depreciation + Loan interest + Fuel + Insurance + Maintenance + Other
Loan interest = (Payment × Term) − Principal · Cost per mile = True cost ÷ (Annual miles × Years)
Worked example — a $40,000 car over 5 years
$5,000 down, 7% over 60 months, 12,000 miles a year at 25 MPG and $3.50 a gallon, $1,800 insurance, $800 maintenance, $400 other.
| Cost | 5-year total | Share |
|---|---|---|
| Depreciation | $23,296 | 44% |
| Insurance | $9,000 | 17% |
| Fuel | $8,400 | 16% |
| Loan interest | $6,582 | 12% |
| Maintenance | $4,000 | 8% |
| Registration, tolls, parking | $2,000 | 4% |
| True total | $53,278 | 100% |
That is $888 a month and 89¢ a mile — against a loan payment of $693. The payment is 78% of the real monthly cost, and the car is still worth about $16,700 at the end.
Depreciation is the cost nobody sees
Every other line here produces a bill. Fuel has a receipt, insurance renews annually, maintenance arrives with an invoice, and the loan takes a payment every month. Depreciation does none of that — it simply happens, quietly, and you discover the total on the day you sell.
At 44% of the total in this example, it is larger than fuel and insurance combined, and nearly four times the loan interest. This is why the monthly payment is such a poor proxy for what a car costs, and why a cheaper car that depreciates hard can be more expensive to own than a pricier one that holds value.
Why principal is not counted
A common mistake in these calculations is treating the whole loan payment as a cost. It is not. The interest portion is money spent; the principal portion converts cash into equity in the car, and you get that back when you sell.
Counting both the principal and the depreciation would double-count the same thing — depreciation already measures the value the car loses. That is why this calculator counts interest only, and why switching the term to "paying cash" changes the total by about 12% rather than eliminating half of it. Financing costs you the interest. The car costs you its value either way.
What lowers the real cost
- Keeping the car longer. The single most effective lever. Depreciation slows as the car ages and the loan eventually ends, so years six through ten are dramatically cheaper per year than years one through five.
- Buying used. Skipping the first-year drop removes the largest single chunk of the total.
- Choosing for resale value, which affects the biggest line item directly.
- Shopping insurance, which is the second-largest line here and varies enormously between insurers and between cars.
- Driving the car you have. Every trade resets you to the expensive part of the depreciation curve.
What this does not include
Tyres beyond routine maintenance, extended warranties, and the opportunity cost of capital tied up in the car. Maintenance is also modelled as a flat annual figure, which understates later years — costs rise sharply once a car passes seven or eight years, and a figure appropriate for a new car will be well short by then. For a long ownership horizon, set maintenance toward the upper end of your estimate.
How we calculate this
Six costs are summed over the ownership period. Depreciation uses a declining-balance curve with a larger first-year rate. Loan interest is total payments minus the principal — principal is deliberately excluded, since it buys equity recovered at resale and is already captured by depreciation. Fuel is annual miles ÷ MPG × price, and insurance, maintenance, and other costs are annual figures times the years held. The total divides by years, months, and miles. Resale value is reported separately as an asset you keep, not netted off, so the cost figures show what motoring actually consumed.
Sources
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Frequently asked questions
What does a car really cost per month?
Far more than the payment. A $40,000 car kept five years at 12,000 miles a year typically costs around $890 a month once depreciation, fuel, insurance, maintenance, interest, and registration are counted — against a loan payment of about $693. Depreciation alone is usually the largest single line.
What is the biggest cost of owning a car?
Depreciation, in almost every case. On a $40,000 car over five years it typically runs $23,000 or more — considerably above fuel, insurance, and loan interest individually, and often more than all the running costs combined. It is also the only major cost that never produces a bill, which is why people consistently underestimate it.
Should the loan payment count as a cost?
Only the interest. The principal portion buys equity you recover when you sell, so counting the whole payment as a cost double-counts against depreciation, which already captures the value the car loses. This calculator counts interest only, which is why the total moves surprisingly little when you switch to paying cash.
Does paying cash for a car make it cheaper?
It saves the interest, and nothing else. Depreciation, fuel, insurance, and maintenance are identical whether or not a lender is involved — the car loses value at the same rate either way. On the default example, paying cash saves about $6,500 of interest out of a $53,000 total, so roughly 12%. Worth having, but not the transformation people expect.
How much should I budget for maintenance?
Roughly $600–$1,200 a year for a typical car in its first five years, rising sharply after that. A ten-year-old car can easily run $1,500–$2,500 a year once suspension, cooling, and other wear items start arriving. A figure that is right for a nearly-new car will badly understate an older one.
How do I compare two cars properly?
Run each through this calculator and compare cost per year or per mile, not sticker price or payment. A cheaper car that depreciates hard, drinks fuel, and costs more to insure can easily be more expensive to own than a pricier one that holds value — and the monthly payment tells you none of that.
What is a reasonable cost per mile?
Typically 50 to 90 cents per mile all-in for a car in its first several years, which surprises most people. Keeping a car past the loan and into its lower-depreciation years is what brings that figure down — an eight-year-old car driven regularly can be under 40 cents a mile.
Does driving more miles make the car cheaper per mile?
Yes, up to a point. Depreciation, insurance, and registration are largely fixed costs, so spreading them over more miles lowers the per-mile figure even though the total rises. That is why a car driven 5,000 miles a year can be very expensive per mile while being cheap in absolute terms — and why an unused second car is often a poor deal.