The True Cost of a Car Over Its Lifetime

Car shoppers are normally all about getting the best deal: the smallest amount of money down, the most flexible lease terms and lowest finance charges. What some car buyers fail to calculate is not only the up-front costs associated with buying a car, but the costs to maintain a car over its lifetime, i.e., the total cost of car ownership.

Depending on the kind of car you purchase, it may end up actually costing more than you ever imagined. I can tell you from personal experience that the 2003 Ford Mustang I purchased used in 2006 has been expensive to maintain over the last five years.  Through, shocks, breaks, high performance tires (ugh), regular maintenance and some body work, I’ve spent almost as much keeping the car looking and running pristine as I did when I first purchased it.

To illustrate, we used to determine what the true cost to own a couple different types of cars would be over 5 years. Before you get scared away with the numbers, let’s first understand the costs associated with car ownership.

Depreciation is normally the largest cost factor by far. Depreciation is a vehicle’s loss in value over a defined period. An average model depreciates about 65% over five years. Some vehicles depreciate faster than others because of oversupply, limited appeal, or rebates on similar new models. Depreciation greatly affects the resale value of a vehicle.

Fuel Costs can really add up, especially for SUVs. The fuel expense in the below examples is based on the revised EPA mileage ratings assuming consumption consists of 45% highway and 55% city driving and that the vehicle is equipped with the transmission that is standard equipment for that vehicle. Fuel cost estimates are based on the one-year moving average of self-service, regular unleaded gasoline prices in Washington, D.C.  To reduce your fuel costs, consider a gas rewards credit card.

Repairs are estimated expenses not covered by the vehicle manufacturer’s warranty.  This expense is based on the cost of a typical “zero deductible” extended warranty for the vehicle, minus the estimated amount of that cost that consists of the warranty provider’s overhead and profit.

Maintenance is the estimated expense of scheduled and unscheduled maintenance. Scheduled maintenance involves factory-recommended items once a specified mileage is reached. Unscheduled maintenance includes the replacement of parts such as breaks, batteries, signal lights, wiper blade, tires, etc.

Interest/Financing is tied directly to the price of a vehicle (assuming the vehicle is not purchased with 100% cash). Edmunds calculates financing costs as interest on a loan in the amount of the Total Cash Price, assuming a 10% down payment and a loan term of 60 months. The interest rate used in the below examples is the prevailing rate that banks and other direct automotive lenders are currently charging consumers in a predetermined geographic region (Washington, D.C.) who are in the “Gold” credit tier. In other words, if you have poor credit and are lucky enough to obtain a loan, financing costs are likely to be much higher. According to Edmunds, even if you don’t finance your vehicle, this cost is still appropriate because it reflects the estimated “opportunity cost” (i.e., the amount you may earn) if you had otherwise invested the amount used to purchase the vehicle.

Insurance Costs vary depending on many factors including age, location, coverage amounts, make and model of vehicle and driving record. Edmunds calculates this cost by looking at the premium charged by insurers in a specific locale (in this instance, Washington, D.C.). The premium includes liability, comprehensive and collision from major insurers. Keep in mind that it is possible to locate a great deal on insurance if you are insuring more than one vehicle with an insurance company.

Taxes and Fees makes up a portion of a car’s cost and include base sales taxes and license and registration fees, and any other taxes, if applicable. These taxes and fees are usually based on a percentage of the purchase price, and generally decrease as the vehicle ages and loses value.

Now that we understand what the true costs of owning a car include, let’s look at some real life examples.

Example 1 – According to, the cost to own a 2009 Nissan Quest 4-door minivan over 5 years (assuming 15,000 miles a year) is approximately $47,500 broken down as follows:

 Year 1Year 2Year 3Year 4Year 5 5 Year Total
Taxes and Fees$1,695$113$113$113$113$2,147
Yearly Totals$13,254$8,962$8,354$8,625$8,301$47,496

Example 2 – According to, the cost to own a 2010 Volkswagen Jetta 4 door Sedan over 5 years (assuming 15,000 miles a year) is approximately $35,500 broken down as follows:
 Year 1Year 2Year 3Year 4Year 5 5 Year Total
Taxes and Fees$1,206$80 $80 $80 $80 $1,526
Yearly Totals9,179$6,338$6,469$6,603$6,957$35,546

Again, the above are estimates and will vary depending, of course, on the location in which you live and the make and model of the type of car you buy. The important point to remember is that it’s not as simple as just driving off the lot. Car ownership entails many other costs and if you’re not prepared, you may go into a heap of debt.   Stay smart, plan ahead for any impending repairs and take good care of your automobile.  A little money spent early can be a lot of money saved late.

Topics: Smart Spending

8 Responses to “The True Cost of a Car Over Its Lifetime”

  1. Of Course, Examples of “FOREIGN CARS”. Let’s try an AMERICAN BRAND CAR. [or are you afraid to show the “TRUE” Expense / Depreciation of “Vehicle Ownership?] Drive “ANY” new car off a lot and lose 23% or more of it’s “Purchase Value” as soon as the tire(s) leave a dealership. Never mind the cost to maintain at a dealership [Factory RECOMMENDED], for the “Original or [nowadays, 2nd or 3rd] owners, provided age / mileage has not been exceeded. Something to check.. “Age of used vehicles and mileage.” Ever wonder why 5 year old vehicles have over 100,000 miles on them if average driver’s put 12,000 on per year? And dealerships still want about 1/2 or more “Original Sticker Price”?

    • Another Rich

      What is your point here Perry?

      These charts are similar for any new car. You appear to be ranting and missed the point.

      I think this is a good summary of what everyone should know about buying a car. It’s simple. The cost of owning a car should include everything.

      I fall out of this range because I own a rarely driven SUV that is 11 years old and now I’m in the area of deciding about rebuilding transmissions and such.

  2. When I bought my latest car I knew I would have it for the life of the car. Its important to keep a car for as long as possible. My parents have this problem with buying a truck and getting rid of it a few years later. I swear they have gone through 20 cars in my life time. My first car was a lemon so I vowed to own a good reliable car and so far after 3 years it hasn’t broken down once.

    You have to go into it knowing the cost of gas, oils changes, maintenance and how long you will have the car. If you are cool with it then the cost of the car won’t bother you 5 years from now.. because you will probably still be paying for it!

  3. Autos can be one of the biggest waste of money if not chosen wisely. Certainly a time to get rid of old cars that eat up so much cash in repairs, gas, etc. Interest rates for cars too! If the interest rate is high, you probably can’t really afford that car. As a Financial writer I too like to make similar suggestions to be more frugal. It’s one thing to buy a nice new car, but if you do, be certain that you can truly afford it. In my personal opinion, with the economy these days, I think that the majority of middle class would probably be best suited buying a slightly used car, just my opinion. Thank you so much for the insightful article Michael!

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