Car Cost of Ownership Calculator

The calculation itself

Total cost of ownership is depreciation, plus finance charges, plus running costs, over however long you keep the car. Depreciation is the purchase price less what you sell it for.

Finance charges are total payments less the amount financed — the interest, not the payments, since the principal is money you were always going to spend on the car.

Divided by the months you own it, that gives the figure to compare against another car. It is almost never close to the monthly payment.

In practice

A $40,000 car kept five years and sold for $18,000, financed at $34,000 over 60 months at 7%.

The payment is $673.24 a month and total interest is $6,394.45. Depreciation is $22,000. Running costs — $1,400 insurance, $2,000 fuel, $900 maintenance, $200 registration a year — come to $22,500 over the five years.

Total: $50,894.45, or $848.24 a month. The payment was $673.24. The car costs 26% more than the number on the finance agreement.

And depreciation alone is 43% of the total — more than three times the interest. It is the largest single cost of owning this car and the only one that never arrives as a bill.

Why depreciation is invisible

Every other cost is a transaction. Insurance is a premium, fuel is a receipt, interest is a line on a statement. Depreciation is charged silently and collected once, on the day you sell.

Which is why cash buyers routinely believe their car is cheap to run. Removing the finance charge removes the smaller number and leaves the larger one untouched — the $22,000 is paid either way.

It also explains why keeping a car longer reduces its cost per year so sharply. The annual loss shrinks as the car ages, so the cheapest years of ownership are the ones after the loan has ended and the depreciation curve has flattened.

Where the figure deceives

The resale value is a forecast, and it is the input the whole answer turns on. A $2,000 error there moves the total by $2,000 — more than a year of maintenance.

Depreciation rates vary enormously by model, and general figures mislead badly at the extremes. This page takes them as inputs rather than asserting a curve, and a valuation guide for the specific model is worth more than any default.

Maintenance is understated by almost everyone, because it is lumpy: several cheap years, then tyres, brakes and a major service in the same twelve months. Budget from the model's service schedule rather than from an average.

New against used is decided here rather than on the sticker. Used cars carry higher finance rates and nearer-term maintenance but have had the steepest depreciation absorbed by someone else, and which wins depends entirely on the specific pair of cars.

Acting on it

Compare cars on cost per month of ownership, not on payment. Two cars with the same payment can differ by thousands a year once depreciation and insurance are in.

Get the insurance quote and check the model's typical resale before committing. Those two inputs move the answer more than the interest rate does.

Keeping the car a few years past the loan is the single largest saving available here, and it needs no negotiation with anybody.