Total cost of ownership adds up what a car costs while you keep it: the fall in its value, fuel, insurance, maintenance and loan interest. The value drops by the first-year rate, then by the later rate on what is left each year. Fuel is distance divided by economy times the price, and interest comes from a monthly amortised loan, counting only the years you own the car.
The default, a 35,000 car kept five years and driven 15,000 km a year, with 30,000 borrowed at 7% over five years, costs 46,713.48 in total: 9,342.70 a year or 0.62 per km. Depreciation of about 20,384 is the largest part, leaving the car worth 14,616.18.
Fuel, insurance and maintenance are held at today's prices for every year, and the car is assumed to sell at its depreciated value. Set the depreciation rates from resale prices for the model you are considering.
How much does it cost to own a car?
Add the car's loss in value to the fuel, insurance, maintenance and loan interest you pay while you keep it. A 35,000 car kept five years and driven 15,000 km a year, with 30,000 borrowed at 7%, costs about 46,713 in total: 9,342.70 a year, or 0.62 per km.
Depreciation stands in for the purchase price. Adding the price, the down payment or the loan's principal as well would pay for the car twice; only the interest is an extra cost of borrowing.
Worked example: a 35,000 car over five years
Depreciation: 35,000 × 0.80 × 0.85⁴ = 14,616.175 left after 20% in the first year and 15% in each later year, so 20,383.825 is lost. The display rounds these to 14,616.18 and 20,383.82.
Fuel: 15,000 km × 7 L/100 km = 1,050 L a year × 1.75 = 1,837.50, or 9,187.50 over five years.
Insurance and maintenance: (1,500 + 800) × 5 = 11,500.
Loan interest: 30,000 at 7% over 60 months is 594.04 a month and 5,642.16 in interest.
The readout rounds exact halfway amounts to an even final digit, while totals use the unrounded amounts. The example check's reference amounts use half-up rounding, which can differ by one cent at a tie.
Depreciation is 44% of the total. AAA's 2026 Your Driving Costs study also finds it the largest ownership cost of a new vehicle, at a weighted average of $4,422 a year.
How car depreciation is calculated
The first-year rate applies to the price, and each later rate to the value left at the start of that year: value after n years = price × (1 − first-year rate) × (1 − later rate)^(n − 1).
The default car is worth 28,000 after one year, then 23,800, 20,230, 17,195.50 and 14,616.18. Each year's loss shrinks, from 7,000 to 2,579.33, because 15% is taken from a smaller value each time.
Mileage, condition, model and local demand all move real resale prices, so check the rates against listings for similar used cars.
Loan interest while you own the car
The monthly payment is principal × r ÷ [1 − (1 + r)^−N], where r is the annual rate ÷ 12 and N is the number of months. At a 0% rate it is simply principal ÷ N.
Only interest paid while you own the car counts. A 32,000 loan at 6.5% over six years costs 537.92 a month; selling after five years counts 6,508.44 of interest, and the sale must clear the 6,233.37 still owed.
A cash buyer pays no interest: the default car bought outright costs 41,071.325 over five years, displayed as 41,071.32. The return that cash could have earned elsewhere is a real cost too, and it is not part of this total.
Ownership cost examples
Cash purchase is the default car bought outright. Zero rate three years is a 20,000 car driven 10,000 km a year at 6 L/100 km with fuel at 2 a liter, 1,000 of insurance and 500 of maintenance, kept three years on a five-year 0% loan.
US financed is a 40,000 car with 8,000 down at 6.5% over six years, driven 12,000 miles a year at 25 US mpg with gas at 3.50 a gallon, 1,800 of insurance and 900 of maintenance. No driving is the default with zero distance.
Scenario
Ownership total
Resale value
Loan interest
Default
46713.482373
14616.175000
5642.157373
Cash purchase
41071.325000
14616.175000
0.000000
Zero rate three years
16540.000000
11560.000000
0.000000
US financed
51704.237791
16704.200000
6508.437791
No driving
37525.982373
14616.175000
5642.157373
The no-driving row shows how much of the cost is fixed: parked for five years, the default car still costs 37,525.98, and with no distance there is no cost per km.
Cost per km and per mile
Divide the total by the distance driven. The default car covers 75,000 km, so it costs 0.62 per km or 1.00 per mile; the US example costs 0.86 per mile over 60,000 miles.
Fuel is a small part of that: 0.1225 per km in the default case, about a fifth of the total. Depreciation, at 44%, moves the answer far more.
What the total leaves out
Fuel, insurance and maintenance stay at today's prices every year, with no inflation or rising repair bills as the car ages.
Registration, taxes, parking, tolls and home charging equipment are not included.
The fuel cost assumes a liquid fuel; price an electric car's energy with the EV charging calculator.
Trade-in balances, negative equity, balloon payments and lease residuals are outside this loan model.
Common mistakes
Counting the price and depreciation. The loss in value already covers the purchase.
Counting the whole loan's interest. If you sell early, only the interest paid before the sale is a cost of owning.
Applying the later rate to the original price. 15% of 35,000 every year is 5,250 a year, far more than the shrinking losses above.
US: 40,000 car, 12,000 mi a year at 25 mpg, 6.5% for 6 years
Purchase price
40,000
Years of ownership
5
Depreciation in year 1
20%
Depreciation each later year
15%
Distance per year
12,000 mi
Fuel economy
25 mpg (US)
Fuel price per
US gallon
Fuel price
3.5
Insurance per year
1800
Maintenance and repairs per year
900
Down payment
8000
Loan interest rate (APR)
6.5%
Loan term
6 years
Total cost of ownership
51,704.24
Fuel
8,400.00
Loan interest
6,508.44
Cost per mile
0.86
Monthly loan payment
537.92
Checked against: 480 gal/yr × 3.50 × 5 = 8,400; 32,000 at 6.5% over 72 months → 537.92/month; interest in the first 60 months 6,508.44
Questions
What is included in the total cost of owning a car?
Depreciation, fuel, insurance, maintenance and repairs, and loan interest over the years you keep the car. AAA's 2026 Your Driving Costs study (15 September 2026) puts the average for a new vehicle at $12,863 a year, based on five years and 75,000 miles. The default here, a 35,000 car kept five years and driven 15,000 km a year, comes to 46,713.48, or 9,342.70 a year.
What is the biggest cost of owning a new car?
Depreciation. AAA's 2026 Your Driving Costs study found new vehicles lose a weighted average of $4,422 a year, its largest ownership cost. With the defaults here, a 35,000 car losing 20% in year one and 15% a year after that is worth 14,616.18 after five years, so depreciation is about 20,384, or 44% of the 46,713.48 total.
How do you calculate car depreciation?
Multiply the value by one minus the yearly rate, once for each year owned. With 20% in the first year and 15% after that, a 35,000 car is worth 35,000 × 0.8 × 0.85⁴ = 14,616.18 after five years, and the difference, about 20,384, is the depreciation. Mileage, condition and model all move real resale prices, so check the rates against listings for similar used cars.
Does loan interest count as a cost of ownership?
Yes, because it is money paid only for borrowing. A 30,000 loan at 7% APR over five years costs 594.04 a month and 5,642.16 in interest. Only interest paid while you own the car is counted; if you sell before the loan ends, the remaining balance is repaid from the sale. A cash buyer pays no interest but gives up what the money could have earned, which is not modelled.
How much does a car cost per mile to own?
Divide the total cost by the distance driven. The default car costs 46,713.48 over 75,000 km, which is 0.62 per km or 1.00 per mile. For comparison, the IRS standard mileage rate for business driving, which may be claimed in place of actual car expenses, is 76 cents a mile from 1 July 2026 (IR-2026-29).
For planning only. Lenders, tax authorities and markets apply their own rounding, fees and rules; confirm figures with them before you commit.
Checked against references
This calculator includes 4 worked examples with independently sourced answers. They run in the test suite, and you can run them here too.
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