How to Calculate the True Cost of Owning a Car

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Purchasing a car can be a major expense, second only to buying a home for most consumers. It can be a useful asset, especially you love to travel by land. Like owning a home, owning a car also comes with the cost of maintenance and upkeep. What initially seems like a low starting purchase price can skyrocket over time when you factor in the added costs of insurance, maintenance, and fuel. For example, although a Dodge Journey SUV may cost $1,600 less than the comparable Toyota Highlander, according to Consumer Reports the Dodge will actually cost you $5,000 more in operating costs over a 5-year period. It’s helpful to take a closer look at all of these associated expenses to calculate the true cost of owning a car. This will help you better compare your options, for a realistic picture of what to budget.

Cost of Fuel

One of the most obvious costs you can expect to pay is fuel. This can really add up over time, particularly for larger cars and SUVs. Cars that require premium or diesel fuel will take a bite out of your budget, while hybrid vehicles will help offset their higher sticker price by lowering your fees. Gas accounts for nearly 25% of the full cost of car ownership over a period of five years, so it’s worth comparing mileage carefully to choose a lighter, more efficient car if possible.

Depreciation of Value

Although fuel may come to mind first, depreciation is actually the largest expense when you look at car ownership as a full package. It accounts for almost half of ownership costs over the first five years of owning a car, because the car’s value can fall so steeply. It’s estimated that the average model depreciates in value a whopping 65% in the first five years alone. To offset depreciation, you’ll want to compare models carefully and look at their resale values. Perennial bestsellers like the practical Toyota Prius tend to fare better over time when compared to sportier hatchbacks like a Suzuki SX4 or Mazda 3.


Your insurance rates can vary widely, depending not only on the car you drive but also on your driving record, credit history, and location. However, some cars are easier to insure than others. A practical Skoda will always incur lower rates than a flashy BMW. If you have narrowed down your list of potential cars to a few top candidates, you’ll want to run these through insurance comparison tools to see how they measure up. It’s also worth shopping around to find the lowest insurance rates, because each provider has their own unique formula.

Cost of Maintenance

If you’re purchasing a brand-new car, in most cases you won’t have to worry too much about costly repairs. However, to extend the lifespan of your car and fight depreciation it’s still important to take it in for regular maintenance. According to data from Consumer Reports, maintenance and repair costs make up 4 percent of the total ownership costs of an auto. Most costs are covered by a factory warranty during this time, but some vehicles still can incur higher costs than others. The Porsche Cayenne SUV can cost $4,000 in maintenance costs during five years of ownership, which is far higher than most others in its class.

No matter what type of car you are driving, you can minimise your annual costs by keeping an eye on your budget, including how much you’re spending on maintenance services, insurance, and fuel. This will help you save money by keeping car ownership costs under control. With good and careful budgeting, your personal finances will surely take a turn for the better even if you own a car.

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