Car Math: The True Cost of a Car

The story: Alex’s first car

At a used car lot, Alex looks past the price tag to the monthly costs of owning a car, and compares them with a bus pass and a bike.

1. Narrator: Alex found a used car for $6,000 and has the money saved. Is $6,000 the real cost?
2. Seller: Great car, great price! Just $6,000 and it’s yours.
3. Narrator: The price is only the start. Insurance, fuel, repairs, registration and parking come every month.
4. Narrator: The car also loses value each year. That’s depreciation, a cost you don’t see until you sell.
5. Alex: Add it all up and it’s about $330 a month. A bus pass and a bike would be about $80.
6. Narrator: Some people need a car for work or where they live. Others can choose. Either way, the monthly total is what counts.
7. Narrator: The price is where car costs start, not where they end.

What you’ll learn

1. Total cost of ownership

   Owning a car costs more than its price. Add taxes and fees, insurance, fuel or charging, maintenance, repairs, parking, registration and lost value. That full list is the total cost of ownership. Adding it up per month shows the real cost.

2. Depreciation

   Depreciation is value lost over time. A new car usually loses value fastest in its first few years. A used car has already taken some of that drop, but it may need more repairs.

3. Compare the options

   Transit, a bike, walking, rideshare or a shared family car can cost far less per month. Which fits depends on where you live, your job and your schedule. Car or no car, the monthly totals tell the story.

4. Price it in hours

   Divide the monthly cost by take-home pay per hour. That’s how many hours of work a car takes each month.

   Example: $350 a month ÷ $14 an hour = 25 hours of work each month.

Key words

total cost of ownership

every cost of having something, not just its price

depreciation

value lost over time

registration

the yearly fee and paperwork to keep a car legal on the road

maintenance

regular care, like oil changes and tires, that keeps a car running

Common questions

Is a used car always cheaper?

Often, because it has already lost much of its value. But older cars can need more repairs and use more fuel. Comparing monthly totals shows the real answer.

Remember this

The price is where car costs start, not where they end.

Try it: Estimate a car’s monthly cost

1. Use the sample car from this lesson, or a family car with a grown-up.
2. List insurance, fuel, repairs, registration, parking and lost value per month.
3. Add them up, then compare with a transit or bike option.

Estimate the sample car’s monthly cost, or a family car’s with a grown-up.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• Fuel economy and yearly fuel cost, by car

  Source: fueleconomy.gov(opens in a new tab)