The true monthly cost of owning a car
The payment is usually less than half of it.
A used SUV with a $540 monthly payment actually costs about $1,240 a month to own. The payment is the number people budget around; insurance, fuel, maintenance, and depreciation together are larger than the payment itself.
One vehicle, fully costed
A $31,000 used SUV, financed, with depreciation at 12% a year:
| Component | Monthly |
|---|---|
| Loan payment | $540 |
| Insurance | $145 |
| Fuel | $185 |
| Maintenance | $60 |
| Depreciation (12%/yr on $31,000) | $310 |
| True monthly cost | $1,240 |
Cash actually leaving the account is $930 a month. Depreciation adds another $310 — about a quarter of the total — and it is the component almost nobody counts.
Why depreciation counts even though you never write the cheque
Depreciation is not an accounting abstraction; it is the largest single cost of owning most vehicles. A car worth $31,000 today and about $27,280 in a year has consumed $3,720 of your net worth. You simply pay it all at once, later, in the form of a lower trade-in or sale price than you paid.
Leaving it out is what makes a car feel affordable and a household budget feel mysteriously tight. The money is gone either way — the only question is whether your planning acknowledged it.
What the two big yardsticks say
You do not have to take this page’s word for the size of the problem. Two organisations measure the all-in cost of running a car every year, with different methods, and they land within a penny of each other.
AAA’s Your Driving Costs study puts the average cost of owning and operating a new vehicle in 2025 at $11,577 a year — $965 a month — assuming 15,000 miles a year over five years. Its largest single component is depreciation, at $4,334 a year, roughly 37% of the total. The IRS standard mileage rate, the government’s own estimate of what a business mile really costs, is 76 cents for the second half of 2026 — and the IRS is explicit that the figure covers depreciation, insurance, and maintenance, not just fuel. Divide AAA’s annual total by its 15,000 miles and you get about 77 cents. Two independent methodologies, one penny apart.
Both anchors back the two claims this page makes. The payment is a minority of the real cost, and depreciation is the largest piece — the new-SUV example above puts it at 38% of the total, within a point of AAA’s measured 37%. One thing AAA counts that the examples here leave out: licence, registration, and taxes, which average $813 a year — about $68 a month. Add your own state’s figure when you cost your vehicles below.
Two cars, which is the normal case
Add a $22,000 used sedan with a $405 payment, $120 insurance, $140 fuel, and $55 maintenance:
| SUV | Sedan | Both | |
|---|---|---|---|
| Loan payments | $540 | $405 | $945 |
| Total cash cost | $930 | $720 | $1,650 |
| True cost incl. depreciation | $1,240 | $940 | $2,180 |
That is $26,160 a year, and about 2.3 times what the loan payments alone imply. For most households transport is the second-largest line item after housing, and it is the one most often understated by more than half.
Fixed costs, variable costs, and what one more mile costs
Not all of the $1,240 behaves the same way. Insurance, registration, the finance charge inside the payment, and most of a newer car’s depreciation accrue whether the car moves or not — those are fixed. Fuel, tyres, and wear-driven maintenance scale with miles — those are variable. On AAA’s 2025 numbers the variable side runs about 24 cents a mile: 13.0 cents of fuel plus 11.0 cents of maintenance, repair, and tyres, before counting the extra depreciation each mile adds.
The split matters because different questions use different numbers. “Should we drive or fly?” is a variable-cost question — the insurance is paid either way, so the honest price of a 1,000-mile round trip is $240-plus, not the $130 of fuel most people budget. “Can we afford this car?” and “do we need a second one?” are total-cost questions, where the 76-to-77-cent yardstick and the full table above are the right lens.
The common mistake is using the small number for both: pricing trips at fuel-only and pricing the car itself at payment-only. Both halves undercount, and together they are how a household spends $26,160 a year on transport while believing the number is eleven thousand.
What actually moves the number
- Buying used rather than new. The steepest depreciation happens in the first few years, and it happens to whoever owns the car then. This is the single biggest lever available.
- Holding the car longer. Depreciation as a percentage falls as the value falls, and a paid-off car eliminates the payment entirely while the rest of the costs stay flat.
- Insurance shopping. Premiums for identical coverage vary widely between carriers, and it costs an afternoon to check.
- Whether you need two. The comparison worth running is not SUV versus sedan — it is two cars versus one car plus occasional transit or rideshare. At $940 a month for the second vehicle, the alternatives get a lot of room.
Repairs, warranties, and the maintenance line
The $60 a month in the example is a budget choice, not a measurement. AAA’s measured figure for maintenance, repair, and tyres on newer vehicles is about 11 cents a mile — roughly $138 a month at 15,000 miles a year — and the number drifts up, not down, as a car ages. If your maintenance line has never been hit by an actual repair bill, it is probably set at hope rather than history.
Extended warranties and service contracts are the products sold into that gap, and the arithmetic on them is unsentimental: a warranty is prepaid repairs plus the seller’s margin and overhead, so on average the buyer funds the margin. What a warranty genuinely does is convert a variable cost into a fixed one — and that certainty has real value in exactly one situation: when a surprise $2,500 repair would otherwise land on a credit card at 22%. If that describes the budget, the cheaper fix is usually the starter emergency fund, which self-insures the car and everything else in the house at the same time.
Common questions
How much does it really cost to own a car each month?
AAA’s 2025 average for a new vehicle is $965 a month all-in, at 15,000 miles a year. The worked example on this page — a $31,000 used SUV, financed — comes to $1,240 a month once insurance, fuel, maintenance, and depreciation are counted. The loan payment is usually less than half of the true figure.
How do I calculate the total cost of owning a car?
Add six lines: the loan or lease payment, insurance, fuel, maintenance and tyres, licence and registration, and depreciation — your car’s value now minus its value a year from now. The last one is the line almost everyone skips, and it is typically the largest.
What is the biggest cost of owning a car?
Depreciation, in most cases. AAA measures it at $4,334 a year for the average new vehicle — about 37% of total ownership cost, more than fuel and maintenance combined. It is invisible month to month because it is collected all at once, later, as a lower resale or trade-in price.
How much does a car cost per mile?
About 76 to 77 cents on average. The IRS business mileage rate is 76 cents for the second half of 2026, and AAA’s independent study works out to roughly 77 cents. Fuel alone is only about 13 cents of that — the rest is depreciation, insurance, maintenance, and fees.
Do extended warranties lower the cost of ownership?
On average, no — a warranty is prepaid repairs plus the seller’s margin, so the typical buyer pays more than the repairs would have cost. What it buys is predictability. A funded maintenance line or an emergency cushion provides the same protection and keeps the margin.
Is keeping an older paid-off car cheaper than buying new?
Almost always. A paid-off car has no payment and no finance charge, and its depreciation has collapsed to a few hundred dollars a year, against $4,334 on the average new vehicle. Repairs rise with age, but they rarely rise anywhere near the $5,000-plus a year that depreciation and finance charges add to a new one.
Cost your own vehicles
Depreciation rates vary by make, model, and condition, and the figures above are planning benchmarks rather than a valuation of your specific car.
It costs multiple vehicles at once, separates cash outlay from depreciation, and lets you compare against transit passes or rideshare to test the one-car question directly. Your auto loan flows in from the Debt calculator and your premium from Insurance, so the total reflects what you actually pay — with no sign-up.
CuraMoneta is an educational tool and does not provide financial, tax, or legal advice. Depreciation modelled at 18% per year for new and 12% for used vehicles; actual rates vary by make, model, mileage, and condition.