The True Cost of Car Ownership

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How much does a car cost? It’s more than what a dealership advertises. Owning a car can be expensive, even if you lease your vehicle or get a loan. Aside from the cost of purchasing a car, there are many other factors that contribute to the total cost of ownership. Drivers also have to pay for insurance, gas and maintenance as part of their car ownership costs. 

Laura Adams, an insurance and financial advisor, indicates: 

“What’s right for you depends on your personal preferences and financial situation. Whether you buy or lease a car, don’t forget to factor in all the additional costs, such as loan interest, taxes, fees, insurance, fuel, power, repairs and ongoing maintenance.”

According to AAA, the average cost of owning a car in 2019 was $9,282, and the cost of car ownership has gotten more expensive over the past decade. Not only are vehicles more expensive, but insurance premiums and gas prices have also gone up. Even car loan rates are on the rise. 

If you’re considering purchasing a car, it’s important to have a clear understanding of the costs you will face. You don’t want to invest in a vehicle and get blindsided by insurance expenses or taxes. Here is a look at the common costs that car owners incur and ways you can save money.

How to calculate the cost of owning a car

To calculate the true cost of owning a car, start by looking at all the expenses you will have. Consider the consistent monthly fees, as well as the once-in-a-while costs. After purchasing your vehicle, here are the main costs you’ll have as a car owner:

  • Monthly car payments
  • Insurance payments
  • Gas
  • Maintenance and repairs
  • Registration, fees and taxes
  • Depreciation of your car

Monthly car payments

In 2018, the average monthly car payment for a new vehicle was $545 and $387 for a used car.  The cost of your monthly car payments depends on a few things, namely the original cost of the car and the length of the loan. 

When you look at your total car spend, the monthly payments are going to make up around 30 percent of your expenses. Before you commit to your loan terms, make sure you can afford the monthly payments. The more expensive the car, the more expensive your monthly payments will be.

Insurance payments

All 50 states legally require drivers to have car insurance or proof of financial responsibility. Although some drivers view insurance as an unnecessary expense, it’s worth it. Nationwide, the average cost of car insurance is $1,555 per year. That breaks down to about $130 per month. However, the amount you’ll pay depends on a number of factors, like your state, age and credit score. The more coverage you have, the more you’ll spend. Based on that average cost and the cost of other car ownership costs, insurance will likely make up around 20 percent of your car costs.


In 2019, the average price of gas was $2.60 per gallon. To figure out how much you can expect to pay for gas, determine your car’s MPG rating, how many miles you drive per month and the cost of gas in your state. 

To make it easy, you can use an online calculator, like this one from Fuel, to do the math for you. Consider gas to be around 15 percent of your total ownership cost.

Maintenance and repairs

New car owners rarely plan for maintenance and repair expenses, which usually results in unexpected costs. Although maintenance isn’t a monthly fee, it can be expensive. According to AAA, the average driver spends $1,186 per year on maintenance and repairs. That breaks down to almost $100 per month, which is the highest monthly cost we calculated. Ultimately, maintenance fees make up about 30 percent of the cost of owning a car.

Registration, fees and taxes

When you register your vehicle with the DMV, you’ll be charged an annual registration fee. The amount varies by state, but it’s usually less than $100 per year. You can look up the cost in your state to see how much you can expect to pay. You will also have to pay sales tax on the vehicle, and cover the cost of a title fee and license plate fee. Usually, these are one-time fees you pay upfront. The fees vary by state, but they are usually minimal. These costs make up less than 5 percent of the ownership cost.

Depreciation of your car 

As soon as you start driving your car, it will begin to depreciate, meaning it loses value overtime. Depreciation isn’t a payment, but it does affect the cost of owning a car. On average, new cars lose $15,000 in value throughout the first five years of ownership. That’s about $250 per month. You can calculate your car’s depreciation by subtracting the car’s current market value from its purchase price, and then subtract sales tax and other fees. Depreciation is inevitable, but keeping up with maintenance and making repairs can slow depreciation.

How to save on car costs

Owning a car isn’t cheap, but there are ways to save money. First and foremost, make sure you purchase a car you can afford. It won’t feel good to drive your dream car when you can barely make the monthly payments. Find a car that is affordable for your budget and won’t cause you financial stress.

When it comes to insurance, don’t be tempted to cut corners. Having good insurance coverage is a must-have, even if you have a perfect driving record. To save money on your insurance premium, shop around and get quotes from multiple providers to find the best deal. You can also take advantage of discounts or increase your deductible to lower your rate.

There are even ways you can lower your monthly gas expenses. Join a gas rewards program, or purchase gas through a warehouse store that sells fuel, like Costco or Sam’s Club. If you’re not sold on a car yet, consider getting an electric car or a fuel-efficient model.

Many drivers choose to purchase a used car, rather than a new car. This can be a big money saver. Used cars are less expensive, so your loan will be cheaper. You might even be able to pay for the car in full, depending on the cost. It’s also much cheaper to insure older cars. You might have to put more money into maintenance and repairs, but overall, you’ll save money. 

Laura emphasizes ways to save over time:

“If saving more over the long-term is your primary objective, then you should buy a car and drive it until the annual repair costs exceed the cost of replacing it. You can keep the total cost of car ownership down by purchasing a less expensive model or a reliable used vehicle. If you like the benefits of leasing a car, it may cost less and allow you to skip having to make expensive repairs during your term.”

The takeaway

  • Owning a car can be expensive, as car ownership costs go beyond the price of buying a car.
  • Drivers should account for monthly payments, insurance, gas, maintenance, fees and taxes to get an accurate monthly cost estimate.
  • Drivers can save money by buying a cheaper car, getting a used car, finding insurance discounts and joining a gas rewards program.

Today, owning a car is expensive, and the average cost of owning a car is increasing. On top of monthly car payments, drivers have to pay for insurance, gas, maintenance, registration fees and taxes. Those costs can add up quickly. Before purchasing a car, drivers should determine how much they’ll spend on a monthly basis and ensure it fits within their budget. 

Elizabeth Rivelli

Elizabeth is an insurance writer for, where she covers insurance providers and reviews policies to help consumers find comprehensive and affordable coverage for every area of their life. She has more than three years of writing experience for top online insurance and finance publications.

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