What Is the True Cost to Own a Car?

There's a lot more to consider than the sticker price.

Feb 16, 2014 at 9:30AM

As most car owners are aware, a car's sticker price does not reflect its true cost of ownership. A less expensive car may require costly repairs later. On the other hand, a pricy SUV may also run up your gas bill. In short, you must look beyond the sticker price to find a truly cheap car.

What determines the cost to own? 
When calculating a car's true cost to own, you'll want to consider a number of elements:

  • Sticker price. While it's not the only factor, how much the car costs is still important. It also affects your overall cost of ownership, especially insurance rates, and the taxes and fees -- including sales tax -- you'll owe.
  • Interest rates. Assuming you need to finance your car, you'll need to estimate your interest rate. Yours will vary depending on your credit score, as well as other issues. For example, new cars typically qualify for lower interest rates, but the longer your loan term, the higher your rate will likely be.
  • Depreciation. Cars generally depreciate about 15%-20% per year for the first five years; however, more expensive cars may depreciate faster. Sub-compacts also depreciate more quickly.
  • Repair costs. While it's impossible to say for sure how much your car will cost you in repairs, you can check its reliability scores through sources such as J. D. Power and Associates and Consumer Reports. Finding common problems with your vehicle can help you estimate repair costs.
  • Insurance costs.  The cost to insure two vehicles, even competing models, can be very different. Along with the specific car you're looking to insure, and the amount of coverage you want to buy, your premium could be affected by your driving habits and history, your age, and your credit score, among other things. Keep in mind that while older cars tend to qualify for lower premiums, newer cars might have safety features that make you eligible for discounts.
  • Fuel costs. If you don't commute to work or school, fuel costs will be less of an issue, but if you drive the average 12,000-15,000 miles per year, they can definitely add up. Consider the MPG of your car, as well as fuel costs in your area.

Don't forget to factor in characteristics that make a car cheaper. For example, while most cars are covered by three-year, 36,000-mile warranties, some carmakers, such as Hyundai and Kia, offer five-year, 60,000-mile warranties with other perks, like roadside assistance. And some eco-friendly cars may qualify for tax credits that could offset a higher purchase price.

What makes and models are the cheapest? 
You could do the math and calculate the cost to own your car yourself, or you could also let someone else do the work for you. Plug your vehicle's information into Edmunds True Cost to Own Calculator to make the process a little easier. Keep in mind that the average American car costs around $0.60 per mile to operate. And in the meantime, take a look at the following models, some of the cheapest cars of 2014. (Costs are calculated for a driver in Los Angeles.) 

  • Toyota Prius. Priuses are among the most popular hybrids sold in the U.S. today, and their true cost makes it clear why. According to Edmunds, a 2013 Prius C will cost $35,679 over five years, or about $0.47 per mile. By far, the largest expense is insurance; Edmunds estimates $11,599 in premiums over five years. Next is depreciation -- the car is expected to lose $9,668 -- and fuel ($6,180). 
  • Honda Fit. The 2013 Fit comes in slightly behind the Prius, with a cost of $36,291 over five years, or about $0.48 per mile. While the Fit costs somewhat more in gas than a Prius -- an estimated $9,970 -- it also costs less to insure ($10,767) and loses less value to depreciation ($7,891). 
  • Toyota Corolla. The Corolla comes in just behind the Fit, at $37,865 over five years, or about $0.50 per mile. The Corolla's insurance premiums (at $12,173) are the biggest expense, followed by fuel ($9,970) and depreciation ($8,291). 
  • Mazda 6. If you're in the market for a larger car, you can still get a relative bargain when it comes to long-term costs. The mid-size Mazda 6 costs around $41,638 over five years, or about $0.55 per mile. Its fuel and depreciation costs ($12,360 and $11,953, respectively) are the highest, followed by insurance, at $8,066. 
  • Subaru Forester. At $47,169 over five years, or $0.62 per mile, the Forester is just over average for all cars, and is much more economical than other SUVs. As you might expect, fuel is the biggest cost associated with the Forester ($13,431), followed by depreciation ($12,406) and insurance ($8,720). 

If you're just starting your car search, note that some carmakers tend to do well across the board when it comes to ownership costs, whether you're shopping for a compact or an SUV. Toyota, Honda, Subaru, and Mazda all make several cars that score well.

Conclusion 
While Edmunds, and other websites, can streamline the process of estimating ownership costs, their level of accuracy will depend on your specific circumstances. You can more easily rely on a calculator to tell you how much your car will depreciate, or how much you're likely to spend on repairs, than you can for it guess your fuel costs or interest rate. It's always important to assess the full financial impact before buying a car, but if you're looking for more than a ballpark figure, you'll have to do your homework.

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