The average monthly new-car payment was $504 in the second quarter of 2017, according to credit reporting agency Experian. But that isn’t the total cost to own a car — far from it.
For vehicles driven 15,000 miles a year, average ownership costs added up to about $706 a month or $8,469 a year in 2017, according to AAA. However, the study didn’t include the monthly car payment, only the cost of interest on that 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 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.
MAINTENANCE AND 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, you can 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.
This is to remind you that cars generally lose value every month. 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 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 best to 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 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.
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. Email: firstname.lastname@example.org.
Updated Sept. 7, 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 Q2 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 repairs and depreciation, 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.