What is the Cost of Owning a Car?

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If you're thinking about buying a car, you've probably considered the sticker price and the monthly payments you'll have to make. Apart from that, however, there are many other expenses associated with the true cost of owning a car.

In this article, we'll explain how to calculate the cost of car ownership, how to reduce the costs, and much more.

How To Calculate the Cost of Owning a Car

An easy way to figure out how much owning a car costs is to use a car cost calculator. All you need to do is add up your regular car expenses, like gas and insurance, and you'll see how much you can expect to spend on a monthly basis. You can do this manually or you can find a free online calculator that will do the math for you.


If you don't already have a car, and you aren't sure how much things like gas and maintenance will cost, you can use these averages as a starting point:


Average Cost

Average new-car monthly payment

Average used-car monthly payment

Average monthly premium insurance


Monthly average gas cost for 15,000 miles per year


Maintenance and repairs


Monthly registration, fees, taxes, and miscellaneous


Total car cost


Note: The above car cost calculator uses estimates based on data from Experian, AAA, GasBuddy, and the National Conference of State Legislatures.

Looking to buy a new car? Easily compare average monthly payments from auto lenders below.

Expenses to Include in the Cost of Owning a Car

According to Experian, the average monthly payment for a new car in Q1 of 2022 was $648 per month. However, that's nowhere near the total cost of owning a car. There are several other costs to factor in, including:


Your car's fuel economy rating impacts how much you spend on gas. The higher the rating, the less you spend on fuel.

Because gas prices can fluctuate daily, and from one location to another, estimating the cost of gas can be tough. However, the national average gas price was $3.189 per gallon over the last year.

To calculate your average monthly gas expense, divide your monthly mileage by your vehicle's fuel economy rating. Then, multiply that number by the cost of a gallon of fuel in your area.

Car Insurance

Car insurance is one of the biggest expenses associated with vehicle ownership. Car insurance premiums are personalized to each individual, based on factors like:

  • Age: Generally, teenagers and people in their 20s pay the highest insurance premiums. Rates drop as you get older.

  • Credit rating: If you have poor credit, you could pay significantly higher premiums than if your credit is good.

  • Driving record: Drivers with recent at-fault accidents, speeding tickets, and other traffic violations tend to pay the highest rates.

  • Gender: Men generally pay more for car insurance than women. That's because men are more likely to get into accidents and have claims, according to historical data.

  • Location: Where you live has a big impact on your premium.

Because car insurance rates can vary, it's a good idea to get car insurance quotes from a few different insurance companies before purchasing a policy. That way, you know you're getting the best rate.

Repairs and Maintenance

The cost of car repairs and maintenance is somewhat connected to how often you drive. The more time spent on the road, the more regularly you'll need to service your vehicle.

When you own a car, you have to keep up with regular maintenance, like tire changes, oil changes, and brake replacements. Not only do you pay for parts, but auto body shops also charge for labor. On average, you can expect to spend $119.38 on repairs and maintenance for a new vehicle. Routine maintenance is usually done three times a year.


You must register your car to legally drive it. And like insurance, registration fees vary depending on your location. In some states, the registration cost is a flat fee paid annually or biannually. In other places, the fee is based on factors like how old your vehicle is and its fuel economy.


A handful of states charge property tax on vehicles, so you'll need to see if it's applicable where you live and how much it is. Because car tax is classified as a property tax, the cost depends on your car's value.


Depending on where you work and live, you may need to consider parking costs in your monthly car expenses. Like gas prices, parking costs differ across states and cities. According to 2018 data from Parkopedia, the average monthly parking charges are highest in New York City at $616 and lowest in St. Louis at $85.

How To Minimize the Cost of Owning a Car

Car expenses can take up a significant portion of your monthly budget. Fortunately, there are ways to cut down on car costs, including:

Refinance Your Car Loan

Refinancing can lower interest rates or extend your loan term, which can lower your monthly payment. Refinancing can be especially beneficial if your credit score has improved after purchasing the car.

Schedule Regular Maintenance

Make routine car maintenance a priority. Check your owner's manual for the car's recommended service intervals and make a note of how often you need to change your oil and other fluids to avoid running into major problems.

And if any repairs need to be done, don't put it off for too long. Sometimes minor issues can develop into bigger problems, costing you more than you would have paid initially.

Review Your Car Insurance Policy

If you haven't reviewed your car insurance policy in a while, now is a good time to check your policy documents. You might be paying for coverages you no longer need, or maybe you feel comfortable raising your deductible to lower your premium. It's also good practice to get new car insurance quotes once per year or after a claim. You might be able to find a lower rate from a different carrier.

Switch to an EV

Besides their contribution to a greener environment, driving an electric or hybrid vehicle can potentially slash the cost of car ownership. Not only do you save money on gas, but EV maintenance costs can be significantly less than gas-powered cars.

Go with a Smaller Engine

Your car's engine size influences how much you spend on gas. For instance, an eight-cylinder engine uses much more fuel than a four-cylinder. So unless you're hauling heavy loads regularly, you probably don't need a bigger engine. Getting a car with a smaller engine will help you spend less on gas.

Skip the SUV

Like with engine size, smaller cars consume less gas. If you want to reduce your fuel expenses, choose a smaller sedan over a truck or SUV.

Car Financing

If you're planning to finance your new car with an auto loan, it's important to understand the different options available. Below are the types of auto loans offered by most lenders:

New Car Loans

New car loans are self-explanatory. You take out a loan at the time of your car purchase and you pay it off over time, plus interest. Remember that a lender defines a new car as one of a previous model year and has never been titled to anyone before.

Used or Pre-Owned Loans

Some lenders offer pre-owned loans that can be used to purchase an older model vehicle. However, there can be restrictions with pre-owned loans. For example, some lenders have a cap on the maximum mileage or age of the car.

Auto Refinancing Loans

If you already have an auto loan, you might choose to refinance your loan to get better terms. This is a popular option for drivers who can qualify for a lower interest rate after taking out their initial loan.

Refinancing your auto loan can help you lower your car payments, save money by reducing the interest paid and pay off your debt quicker.

Auto Loans for Bad Credit

If you have a history of bankruptcy, bad credit, or no credit history, you might need a special auto loan from a lender that has more flexible requirements.

However, keep in mind that having poor credit usually means paying higher interest rates on your auto loan.

Cash-Out Auto Refinance Loans

Cash-out auto refinance loans are similar to auto refinance loans, but they allow you to borrow extra money against the equity of your car. Then, you can put the extra cash into the refinance loan.

Lease Buyout Loans

If you lease your vehicle and want to buy it at the end of the lease period, you can use a lease buyout loan to fund the purchase.


Unlike some assets, like real estate, cars depreciate with time. It's an expensive truth about owning a car, but you will only notice it when you sell or exchange it for another vehicle.

Cars start depreciating immediately after you drive off the lot. Within the first year of ownership, a new car usually depreciates by 20%. After five years, many cars have lost 60% of their original value.

Due to deprecation, buying a used car rather than a new one is more cost-effective. By the time a car is sold on the used market, much of its depreciation has already taken place and has been paid for by the previous owner.


When choosing between a new vs. used vehicle, it's important to consider reliability. Surprisingly, new cars are not bulletproof. Some used cars can actually be more reliable than new cars, especially when you factor in the technology in new cars that can break.

Many used car models hold up well and require just as little maintenance and repairs as their brand-new counterparts. However, it's important to do your research and choose a car (whether it's new or used) that is rated highly for reliability.

Frequently Asked Questions

Below are some frequently asked questions regarding car ownership costs:

What's the Best Way to Reduce Car Ownership Expenses?

There is no single best way to cut car expenses because it depends on individual circumstances. For example, if your budget allows, go for a hybrid or electric car. Shop around for new car insurance quotes to see if you can find a lower premium. You can also think about refinancing your auto loan to get a lower interest rate. There are lots of ways to reduce car ownership costs, regardless of your situation.

Why Is it More Expensive To Own a Car Today?

Owning a car today is more expensive because prices are up across the board. New and used car prices have increased due to the COVID-19 pandemic, gas prices have been fluctuating year over year, and many people want big cars that are much more expensive to own than small cars. Some reports have also found that car repair and maintenance costs are increasing due to part shortages.

Are Used Cars More Expensive To Maintain?

A common misconception is that used cars cost more to maintain. In reality, a used car can be just as reliable, and sometimes even more reliable, than a new car. Many new cars have problems you have to keep paying to fix, and recalls are not uncommon in the first production year of a new model.

How Can I Lower My Insurance Premiums?

There are many ways to lower your car insurance premiums. First, make sure you're taking advantage of discounts offered by your insurer. You can find savings for good students, safe drivers, and bundling your policies. You can also lower your coverage limits, raise your deductibles, improve your credit score, and pay your annual premium in full to potentially save money.

Is Buying a Car Worth It?

Now that you understand how much it costs to own a car, you might be wondering whether it's worth it. Ultimately, buying a car is worth it for some people, and not for others. It all depends on your personal needs and more importantly, your budget.

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