Personal Finance

How Much Does It Cost To Own A Car

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 14 minute read

You’ve undoubtedly used a “real cost to own” calculator like the one found on Edmunds if you’ve ever bought a new car. You may calculate the total cost of ownership over a number of years using these tools.

They think about the money you’ll spend on things like petrol, upkeep, repairs, insurance, and depreciation. The whole cost of ownership, not just the purchase price, will become clear once you have this information.

However, the real cost of ownership is rarely taken into account when making other types of purchases. It’s not common practice, for instance, to consider the fridge’s energy consumption or the cost of repairs before making a purchase. However, a lot might depend on all of these things. Instead of saving money, an inefficient, high-priced refrigerator that often requires maintenance might wind up costing you hundreds.

As part of being a savvy shopper, you should always calculate the total ownership cost before making a purchase. It aids in choosing the product that will be the most cost-effective in the long run, regardless of the initial sticker price.

When Knowing the True Cost of Ownership Is Important

You shouldn’t bother figuring out the total cost of ownership for every purchase, of course. For instance, the time you spend in possession of a dozen eggs and a head of broccoli at the supermarket is exactly equal to the time it takes you to prepare and consume them. 

Having these things is not much more expensive than buying them outright. Nonetheless, it is important to consider the total cost of ownership while making a purchase if:

  1. Investing in this would be a wise choice for the future. If you don’t intend to keep anything for a time, there’s no use in figuring out how much it will cost to own it. For instance, anytime you buy something that you anticipate buying only once in your life, like a large piece of furniture, it’s important to consider how much money you’ll be spending in the long run.
  2. However, it is also important to calculate the cost of replacing items that will need to be replaced in the future but not for at least a few years. Items like a television set, a decent pair of shoes, or a brand new tool might all fit into this category.
  3. The Investment is Substantial. Socks and underwear last a long time, and their prices are typically too low to cause any concern. The only time it pays to do the math is before spending a large quantity of money. A “substantial sum” might mean different things to different people. A millionaire might not give a second thought to a $500 purchase. A minimum wage worker, on the other hand, needs to give serious consideration to even a $20 purchase.
  4. The Expenses Will Never Stop. Books and knick knacks are two examples of items that, once purchased, you hope to never have to replace. The sticker price is equivalent to the real cost of ownership for these. Some things have no end to their price tag, while others keep on eating away at your bank account. For instance, your monthly power cost will increase by a modest amount for every electrical appliance you use. Even while a bicycle doesn’t require any fuel to operate, it does require regular maintenance that costs money.

If a purchase satisfies all three of these criteria, only then should you perform the math. However, the number of things that fit this description is probably more than you realize. 

When you think about the kinds of items you may spend a lot of money on — things like apparel, gadgets, and appliances — you realize that the vast majority of these are investments with periodic maintenance and repair expenditures. Consequently, calculating the total cost of ownership before making any major purchases is almost always a good idea.

True Ownership Costs for Various Product Types

The total cost of ownership can be affected by several variables. When it comes to things that require energy, the price of fuel is a major factor. Remember to factor in the time and money needed to clean, fix, and maintain your other belongings.

Think about how long you’ll be able to utilize the product, too. A new mattress that lasts 10 years may be more expensive than one that just lasts 5. A more costly mattress may actually save money in the long term since it will need to be replaced less frequently.

Finally, it’s important to remember that there are some acquisitions that might really help you save money. If you have an old refrigerator and want to save money on your electricity bill, you may replace it with a new, energy-efficient refrigerator. Similarly, if you invest in a new tool and employ it in home repairs, you may avoid hiring professionals and save money. 

These kinds of savings serve to reduce the overall ownership cost and, in certain situations, can even eliminate that cost entirely.

  1. Cars

The cost of ownership of a new vehicle is the most studied of any product category. The real price of keeping an automobile on the road consists of:

  • Depreciation. The purchase price of the vehicle is, of course, a significant outlay of capital. However, when you trade in your automobile, you’ll get some of that money back. Depreciation is the reduction in value from the original purchase price to the selling price. When it comes to depreciation, a brand-new automobile loses the greatest value in the first year, then gradually lessens in value thereafter. This means that the longer you retain your automobile, the less money you’ll lose annually to depreciation. Depreciation expenses are model-specific, but resources like Kelley Blue Book (KBB) and Edmunds may help you estimate how much your automobile will lose in value over time.
  • Financing. The total price tag of a brand-new vehicle includes interest payments on a loan you take out to buy it. What this will cost depends on three variables: the amount you borrow, the term of the loan, and the interest rate. These figures may be entered into a loan interest calculator to determine the overall cost, such as the one found on Bankrate. If you’re paying cash for the automobile, you can obviously bypass this.
  • Charges and Duties Sales tax, which adds a final amount to the sticker price and varies from state to state, is the final component of a car’s retail price. In addition to this levy, annual costs, such as those for a driver’s license or vehicle registration, are charged to automobile owners by every state. However, if you buy an electric car or plug-in hybrid, you can claim a tax credit of up to $7,500. This rebate reduces your effective out-of-pocket expense somewhat, so it helps to balance the cost of the automobile. Visit to find out which vehicles are eligible for this rebate.
  • Gas prices. Some vehicles have far higher gas consumption rates than others. Costs associated with maintaining a large SUV’s gas tank full are significantly higher than those of a compact hatchback. The amount of gallons of gas an automobile will consume over the course of a year may be calculated by dividing the driver’s annual mileage by the vehicle’s EPA-estimated fuel economy rating in miles per gallon, which can be found on To calculate the annual fuel cost of the automobile, multiply the sum by the price of petrol in your location per gallon.
  • Expenses Associated with Using Electricity. When deciding between a gas-powered vehicle and an electric one like the Nissan Leaf or Chevrolet Bolt, it’s important to factor in the cost of energy rather than gas. In kilowatt-hours (kWh) per one hundred miles, the vehicle’s energy consumption rate may be found on To get the price per 100 miles, multiply that number by the price of power in your area. The annual energy cost may be calculated by taking the number of miles driven and dividing it by 100, then multiplying that result by the cost per 100 miles.
  • Preventative upkeep and corrective maintenance. There are certain expenses associated with automobile ownership, such as the price of oil changes and new tires. However, certain automobiles are more prone to breakdown and require additional maintenance than others, and some have more expensive parts. KBB and Edmunds calculate how much it would cost to fix a vehicle by calculating the price of an extended warranty for that model.
  • Insurance. There are a number of variables that affect how much you’ll pay for vehicle insurance. However, factors such as age, region, and policy coverage are also considered. The insurance estimates provided by the KBB and Edmunds cost-to-own calculators are based on state averages; for a more precise estimate, use the insurance calculator provided by

In terms of the cost, KBB and Edmunds each have their own calculators that will show you the total of all these fees for a certain make and model of car. Costs throughout the first five years of ownership may be calculated for any vehicle model under consideration.

  1. Appliances

In many respects, home appliances resemble automobiles. A large appliance is a significant investment, as it consumes energy and sometimes requires maintenance. Consequently, many of the expenses associated with having an appliance are comparable to the expenses associated with owning a vehicle. Among them are:

  • The Amount Being Paid for Something. Similarly to the price of a car, the initial purchase price of a home appliance is the single most important element in determining the total cost of ownership. One major dissimilarity is that when an appliance reaches the end of its useful life, it is often thrown away rather than traded in. As a result, calculating depreciation costs is unnecessary. Instead, divide the total cost of the appliance by the number of years you anticipate keeping it in use.
  • Price of Energy. The amount of energy required to run various appliances varies greatly. A 30-cubic-foot French-door refrigerator, for instance, can cost you over $100 in annual power costs. To compare, a top-freezer refrigerator that is 20 cubic feet in size and has the Energy Star badge may only require $50 a year in energy costs. Buying a smaller, more energy-efficient refrigerator is a simple approach to reduce household energy use. While window shopping, look for the yellow “Energy Guide” labels to obtain a rough idea of how much each appliance will cost to run over the course of a year.
  • Expenses incurred for repairs. One can never know how often a brand-new appliance, such as a refrigerator or washing machine, may malfunction. The dependability ratings in Consumer Reports provide you an approximation of how dependable it will be, though. The magazine conducts polls of appliance owners to determine how often their devices break down during the first five years. This data is compiled to reveal the most and least trustworthy brands available. You may avoid spending a lot of money on repairs by going with a reputable brand.
  • Spending less thanks to these cost savings. An updated home appliance may end up saving you money. For instance, front-loading washing machines are better for clothes than top-loading ones, according to Consumer Reports. As a result, switching from a top-loader to a front-loader can extend the life of your garments and save you money on replacements. It is difficult to put a price on these cost reductions. However, if you’re in the market for a new washing machine, knowing the differences between top-loaders and front-loaders will help you narrow down your options.

When looking for a new appliance, the best way to evaluate pricing is to sum up all the additional costs. It’s helpful in determining if a replacement appliance is necessary. Compare the yearly electricity and repair costs of an older model to get an idea of how much money you may save by upgrading to a newer model. Then you may determine if it’s better value to repair the present one or get a replacement.

  1. Computers

There is more than just the price of the computer to think about when making a purchase. The “environment” is another significant factor. You can trust that your Macintosh computer will be compatible with other Apple devices like the iPhone, iTunes, and the voice-activated digital assistant Siri.

When compared to competitive items like Android phones, Spotify, and Amazon’s Alexa, PCs are the clear winner. Some of the expenses associated with having a computer are as follows:

  • The Amount Being Paid for Something. The more advanced features you require of your computer, the higher the price tag will be. It will cost you at least $1,000 for a top-of-the-line computer that can run the latest and greatest video games. In comparison, you might spend as little as $225 for a compact desktop computer that’s capable of browsing the web, creating documents, and playing digital music streams.
  • I’m curious as to how long this will continue. The annual cost of owning a computer cannot be calculated simply from the purchase price. You should also estimate how long it will last you. A desktop computer will usually last for around five years before it has to be replaced. However, if you buy a computer that is simple to upgrade, it may last you much longer. Check how simple it is to upgrade the machine’s RAM, hard disk, and graphics card before making a purchase. Having the ability to perform such a simple hardware upgrade will extend the life of your computer and reduce its total cost of ownership.
  • Expenses Incurred by Software. It’s also important to note that the software installed on each machine is a major differentiator. The software you have installed on your current computer may stop working if you upgrade to a new computer running a different operating system, such as a Mac or a new version of Windows. The price of your new computer might go higher if you have to buy a lot of additional software to run on it. Even worse, you could be forced to upgrade to a more expensive software suite if you want to use your new computer with its full capabilities. To give just one example, the Mac version of Microsoft Office costs an extra $40 over the PC version.
  • This implies that every time Office is updated on a Mac, the buyer must shell out for the more expensive Mac version. Consider the software that comes preinstalled on the computer, as well as any additional software that may be required, before making a final purchase. Then, add the price of the program and any improvements you want to make to it.
  • Peripherals. Not every computer is compatible with every piece of software, and the same is true of hardware components like printers, displays, keyboards, and mice. A new computer might not be able to talk to your old printer, for instance, if the printer is fairly old. That additional cost for a printer will have to be added to the cost of the computer you just bought. When looking for a new computer, it’s important to make sure it’s compatible with your existing hardware. If not, you’ll know to add the price of replacements to the tally.
  1. Tools

When purchasing large items like vehicles, refrigerators, or computers, it’s helpful to calculate the annual cost of ownership. After all, you’ll be using these items frequently, maybe many times each week.

A separate rule applies to power tools. A brand new tool could cost several hundred dollars, yet you might only use it twice a year. You should consider the cost per usage rather than the annual cost when deciding which power tool is best for you. Inclusions in the quoted price are as follows:

  • The Amount Being Paid for Something. Consider the tool’s base cost first. Make sure to factor in the cost of accessories like a battery and charger if they’re required for use.
  • Use Frequency. The next step is to speculate on how frequently you’ll put your new device to use. Do your best to tell the truth to yourself. It’s easy to justify spending $400 on a brand new, state-of-the-art miter saw because you’ll use it so frequently for cutting molding and other decorative trim during home improvement tasks. But if you only need new molding in one room, you’ll be out $400.
  • Expenditures on Energy. Every type of power tool has its own fuel cost, whether it is electricity, gasoline, or propane. Unfortunately, tools don’t have labels that tell you how much energy they’ll consume as home appliances do. However, you may obtain a rough idea of how much it will cost to operate various electronic instruments by comparing their wattages. You may learn about the efficiency of gasoline or propane-powered power equipment by reading customer reviews. Tools that operate on electricity are often more affordable than those that run on gasoline. However, unless gas is extremely expensive where you live, propane-powered equipment are often more expensive to use.
  • Maintenance. A tool needs more than just fuel in order to function. Whether it’s oil, filters, batteries, or blades, most instruments need regular upkeep. Think about how much these extra components and accessories will increase the price of a specific tool.
  • Repair. Tools, like appliances, are prone to breaking, and the price of fixing them can vary widely. You can’t foresee whether or when your new tool may malfunction, but you can check out customer reviews to see how reliable a certain brand or model is. You may also check the warranty to determine what sorts of repair expenses it will cover.
  • Possible cost reductions. Even if you only need a tool once, it may still be worthwhile to invest in a brand new one in some circumstances. You may wind up saving more money by completing the repair yourself rather than paying a professional, so consider the cost of the tool with the potential savings. For instance, Improvenet estimates that the cost of tiling a bathroom at $25 per square foot. So, if you need to lay tile over an area larger than four square feet, you’ll save money by purchasing a wet saw for under a hundred dollars and doing the job yourself. One DIY project might not be enough to cover the cost of the item alone, but it might be enough to reduce the per-use price to an acceptable level.
  1. Clothing

Like tools, clothes aren’t something that’s utilized every day. Some, though, see far more action than others. You might, for instance, wear the same winter coat for the entirety of the season, or around 100 days of the year. In comparison, you might only wear your expensive evening dress once or twice a year.

That’s why “cost per wear” is how industry insiders calculate the genuine cost of clothing. Simply divide the total price of the item by the number of times you expect to wear it to arrive at the CPW. Using this method, it is easy to see that a pair of dress pants that cost $100 but will be worn 100 times over the course of two years (once a week) is a better investment than a pair of flip-flops that cost $20 but will be worn only twice.

By shifting your mindset in this way, you’ll be less likely to waste money on fast-fashion and more likely to invest in timeless staples.

Bottom Line

In most cases, the real cost of ownership cannot be calculated with any precision. Too many unknowns make predictions of things like repair costs and longevity difficult. You can estimate whether one product has a larger total cost of ownership than another, but you won’t obtain an exact cost.

However, this is not a problem because a general plan is all that is required. Even if you can only estimate the real cost to own in general terms, it still provides you a more accurate understanding of a product’s cost than merely the figure on the price tag. Whether you’re in the market for a car, a new set of tools, or a new computer, knowing the true cost to own can help you make an informed decision.

In addition, considering the total cost of ownership before making a purchase might help you save money. If you look objectively at the price of a new automobile and compare it to the expense of maintaining your current vehicle, you may decide that you’re better off keeping the one you have. That’s a decision that can save you extremely substantial money.

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