What is the Total Cost of Owning a Car?

WRITTEN BY: Julia Matseikovich


Owning a vehicle is more complex than paying your bank or the dealership monthly. Multiple factors make up the total cost, such as insurance, maintenance, and fuel, making owning far more expensive. If you want to know how much owning a car is to determine if you’re making an intelligent decision, read on. You’ll discover all the expenses factored into the total cost of owning a vehicle to ensure your budget works.

How to Calculate the Total Cost of Owning a Car

Several significant expenses factor into calculating the total cost of owning a vehicle. When you break down each of these and add them together, you can get a reasonably accurate number for the cost of car ownership. Some car ownership costs are more prominent, and you can also find ways to minimize these costs.

What are the Major Costs of Owning a Car?

There are seven significant costs to owning a car. These expenses include:

  • Insurance – speak with a licensed agent to inquire about comparing quotes across several companies and what discounts may be available.
  • Depreciation – the average car depreciation rate is 20% as soon as you drive it off the lot and around 15% each year after
  • Finance charges are the total fees you pay for your car loan, including the financed rate percentage and other fees.
  • Fuel – rapidly rising costs have driven the average fuel cost from 11 cents to 15 cents per mile. The price varies depending on your vehicle and how many miles per gallon it drives.
  • Registration, licensing, and taxes – these fees can vary by state, depending on the cost of taxes and what taxes are included.
  • Maintenance – your car goes through normal wear and tear, so having to replace parts, have routine oil changes, and inspections are all included in the repair cost. The American Automobile Association (AAA) averages the overall maintenance costs at about $66 per month.
  • Tires – lastly, your tires also go through some wear and tear and need replacing from time to time. Depending on where you live, you may also replace your tires for changes in the weather.

How Much Does it Cost to Own a New Car for One year?

According to the AAA, the average annual cost of new vehicle ownership for an entire year is approximately $9,282. It has increased by nearly 5% from last year.

Can I Use My Car for a Tax Write-off?

You can deduct expenses from your tax return if you own a business or are self-employed and use your car for business trips or meetings. Deductions are placed on mileage utilized for your business. However, you must split your expenses if you use the vehicle for business and personal purposes.

How to Determine the Depreciation Cost of Owning a Car

To determine the depreciation on your car, you subtract the car’s current fair market value from your purchase price and deduct sales taxes and registration fees. You can locate your car’s fair market value online through a Kelley Blue Book or Edmund’s search.

Maintain Your Car’s Value

Your car’s depreciation substantially impacts its value when you sell or trade it in. To minimize that impact, you need to maintain your car’s value. Keep the interior and exterior in good shape, and ensure you service your vehicle regularly.

Saving Money on Some of the Biggest Car Costs

You should reevaluate your budget and work to spend less after reviewing your car costs. However, if you already own a car, you still have the option to shop around to save money. Two of your biggest car costs are your insurance premiums and your monthly car payment when owning a car.

Look for Discounts on Your Car Insurance Rates

There are several discounts available for drivers on insurance. You can speak to a representative for the insurance company and inquire about what discounts are available for saving costs. Some eligible factors for discounts include bundling home and auto insurance, safe driving history, or taking a defensive driver course.

Compare Car Insurance Rates

Another method for saving on your insurance is by looking at multiple premiums. For example, compare auto insurance quotes online to find cheaper car insurance rates. You can also contact an insurance agent to help you compare coverage and affordability.

Refinance Your Car Loan

Consider finding a cheaper rate by refinancing your car loan. You can work with your bank, another car loan lender, or your dealership to see where you can find the cheapest interest rate with a lower monthly payment. Doing this can also help you to pay off the auto loan term sooner.

Maximize Your Car’s Gas Mileage

High mileage is another factor in depreciation. Pay attention to the number of miles on your odometer and opt to take a plane for a more extended trip to benefit your car’s value further. You can also drive more efficiently. Maximize mileage by going easy on the pedal, slowing down, using cruise control, and staying on top of your car’s tire pressure.

Use Apps to Help You Save Money on Gas

Crude oil prices are spiking, and gas prices are rising astronomically. Save on gas by downloading free apps on your mobile device to save you gas costs.

Find a Reliable Mechanic

Ask family and friends what mechanic they prefer to have their car serviced. They may know someone who works on cars and can provide you with discounts to save on vehicle costs. In addition, you can check certifications and search for a garage that tailors your car’s specific make and model.

Keep Up With Preventative Maintenance

Most importantly, only push off necessary regular maintenance for your car. Get oil changes on schedule, check your tires regularly, and have them looked at immediately if you notice something isn’t right about your vehicle. If you see the check engine light, don’t ignore it – have it serviced as soon as possible.


How much does a vehicle depreciate each year?

Vehicles depreciate on average about 15% each year you drive them. So check your car’s fair market value yearly to compare how much it depreciates.

Why does it cost so much to own a car?

Owning a car comes with much more than just a monthly car payment. Insurance, registration, routine maintenance, and repairs are all necessary costs that can quickly add to the total cost of car ownership.

How can I minimize the costs of owning a car?

There are many routes to take to help minimize your car costs. For example, refinancing your car loan, changing insurance to a cheaper premium, maximizing your gas mileage, or cashing in on an extended warranty can help cut costs.

Is it more cost-effective to purchase a new or one-year-old car?

Used cars are generally cheaper due to depreciation. A used vehicle that’s only a few years old would contain many similar features to a brand-new one and cost substantially less. However, it also has more mileage and wears and tear on it.

What’s the average cost of owning a car per year?

Data collected by Move.org states that the cost is roughly $5,300 each year to own a car within the United States. That includes average fees for your car payment, insurance, gas, and maintenance.

Calculate Your Total Cost for Your Budget

The total cost of owning a car goes far beyond your initial down payment and car loan. Therefore, when you review the total cost of ownership, your budget should incorporate spending less than 15% each month on your vehicle.

Find ways to save money on the more considerable car costs with insurance and your car loan, and reach out for assistance if you need help. You can also buy a car that holds its value long-term to manage car depreciation.

Finding the lowest insurance costs will assist in lowering the true cost of owning a vehicle. Fill out our online rate form to get rates from the best insurance carriers in your area.