Calculating the total cost of owning your car — or one you might buy soon — is the best way to make sure your auto budget is in line.
The average monthly payment on a new car was $523 in the first quarter of 2018, according to credit reporting agency Experian. But that’s far from the true cost to own a car.
For vehicles driven 15,000 miles a year, average car ownership costs were $8,469 a year, or about $706 a month, in 2017, according to AAA. However, that doesn’t include the whole monthly payment, only the cost of interest on a car loan.
Use NerdWallet’s total car cost calculator to see how much you’re really spending each month. Then you can better understand where you can save money.
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How to calculate your total cost of car ownership
The calculator is pre-populated with estimates based on 15,000 miles of driving per year, so we strongly urge you to enter your exact expenses to see your total car costs.
Monthly car payments and insurance premiums are self-explanatory, but here’s more information on estimating other costs of car ownership.
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.
» MORE: 5 easy ways to save money on gas
Maintenance and repairs
If your car isn’t under warranty, set aside some money for repairs.
You won’t have repair costs if your car is still under the included factory warranty — typically three years/36,000 miles — or if you bought an extended warranty.
However, the average cost of repairs, maintenance and tires is $99 a month for a new car, according to AAA. Common maintenance costs include oil changes and tire rotations, which are usually done at 5,000-mile intervals or, in this scenario, three times each year.
If your car isn’t under warranty, set aside some money for repairs, whether they’re needed each month or not. If you want to dig deeper into these expenses, look at estimates on Kelley Blue Book or Edmunds.com for cars less than 5 years old.
Registration, fees, taxes and miscellaneous
This part is easy: Just put in your annual motor vehicle registration renewal amount, divided by 12. Add any other recurring expenses such as parking costs.
Depreciation and the cost of owning a car
In their first year, cars lose around 20% to 30% of their value.
Although you don’t make a monthly payment for depreciation, cars do lose value over time, which affects your total cost of ownership. 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%, according to Black Book, which tracks used-car pricing.
To get an idea of how much your car has depreciated, find your car’s resale value and compare it to how much you paid.
While there are ways to manage depreciation, 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.
Saving on your biggest car costs
To cut car costs, look at big-ticket items first: your car payment and insurance premiums.
By reviewing the total cost of ownership, you can see the portion of income that goes toward your car each month. It’s best to spend less than 20% of your take-home pay on vehicle costs.
If you find you’re over your car budget or if you want to reduce spending, look at your big-ticket items first: your car payment and insurance premiums. To find the biggest savings, consider refinancing your car loan or shopping for lower car insurance rates.
For more cost-cutting tips see these smart ways to save on car expenses.
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Staff writer Jeanne Lee contributed to this report.
- Estimates for new and used car payments are from Experian’s Q1 2018 State of the Automotive Finance Market report.
- Gas was calculated using 15,000 miles per year, average fuel economy of 25 miles per gallon and $2.91 per gallon, the average from the June 2018 Consumer Price Index from the Bureau of Labor Statistics.
- AAA’s most recent Your Driving Costs study provides annual average costs for insurance, maintenance and repairs based on a new vehicle 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.