The average monthly new-car payment climbed to $509 in the first quarter of 2017, according to credit reporting agency Experian. But that isn’t the total cost to own a car — far from it.
For an average sedan that’s driven 15,000 miles a year, other costs of ownership — including finance charges, but not the principal portion of the monthly car payment — added up to $8,558 a year in 2016, according to AAA. That’s about $713 a month.
Use NerdWallet’s total car cost calculator to see how much you’re really spending each month. Then you can see where you can save money.
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How to calculate your total cost of car ownership
The calculator is prepopulated with estimates based on 15,000 miles of driving per year, so we strongly urge you to input your exact expenses to see your own total car costs.
Monthly car payments and insurance premiums are self-explanatory, but here’s more information on estimating the other costs.
If you know how much you usually spend on fuel, enter that amount in the calculator. Otherwise, divide the number of miles you drive each month by your car’s fuel economy rating, available on FuelEconomy.gov. Multiply that number by the price of a gallon of gas in your area.
You won’t have repair costs if your car is still under the included factory warranty (typically 3 years/36,000 miles) or if you bought an extended warranty. However, maintenance costs will average $66 a month, according to AAA. Common maintenance costs include oil changes and tire rotations, which are usually done at 5,000-mile intervals.
If your car isn’t under warranty, you should set aside some money for repairs, whether they’re needed each month or not. Additionally, you’ll need a new set of tires about once every three years which, according to AAA, amounts to about $150 a year. These expenses are not included in the calculator. If you want to dig deeper, you can look at repair cost estimates on Kelley Blue Book or Edmunds.com for cars less than 5 years old.
FEES AND TAXES
This part is easy — just put in your annual motor vehicle registration renewal amount, divided by 12.
This is to remind you that cars generally lose value every month. But it’s up to you whether you want to include depreciation in your monthly automotive budget. You don’t feel the loss on a monthly basis, but over the years depreciation will take a nasty financial toll.
In their first year, cars lose around 20% to 30% of their value. Over each of the next five years, depreciation is between 15% and 18%, depending on the type of vehicle and market conditions, according to recent data from Black Book, which tracks used-car pricing.
You can look up the predicted depreciation for your specific vehicle on Kelley Blue Book or Edmunds.com. While there are ways to manage depreciation on the cars you drive, you generally have less control over this expense once you own your vehicle. Buying cars that hold their value will save you money in the long run.
If you’re leasing a car, your monthly payment is essentially your depreciation (plus taxes and interest). So just put $0 in the calculator’s depreciation box. If you have an old car and no car payment, enter $0 as well.
Saving on your biggest car costs
By reviewing your car-related expenses in total, you can see the portion of income that goes toward your car each month. It’s recommended that you spend less than 20% of your take-home pay on vehicle costs.
If you find you’re over budget on your car or if you want to reduce spending, look at your big-ticket items first: your car payment (unless you own your car outright) and your insurance premiums. Together, these amount to about two-thirds of your total monthly out-of-pocket car-related expenses. To find the biggest savings, consider refinancing your car loan or shopping for lower car insurance rates.
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Philip Reed and Nicole Arata are staff writers at NerdWallet, a personal finance website. Email: email@example.com and firstname.lastname@example.org, respectively. Staff writer Jeanne Lee contributed to this report. Email: email@example.com.
Updated Aug. 3, 2017.
The averages and estimates used to prepopulate this calculator come from several sources. Estimates for new and used car payments are from Experian’s Q1 2017 “State of the Automotive Finance Market” report. AAA’s most recent “Your Driving Costs” study provides annual average costs for insurance, gas, maintenance and depreciation, based on a new, average sedan owned for five years and driven 15,000 miles a year. We’ve converted these figures to monthly amounts. Registration fees vary widely by location. According to the National Conference of State Legislatures, the fees range from $15 in some states to $274 or more in others, depending on vehicle purchase price, size, age and other factors. Based on the stated high and low fees, we estimated an average $145 for the annual state registration fee.