What’s the Cost of Owning a Car?

Start with your monthly car payment

Some people can live out the dream of buying a car with cash, but this isn’t always an option. Instead, you might have to rely on financing to make your purchase.

Unless you’re able to finance it with a 0% loan from a dealership, your monthly payments will include both principal and interest. The amount of interest will be partly determined by your credit score. Your monthly repayment of principal will change depending on the length of your loan.

The overall amount of your monthly payment will vary depending on the size of your down payment, which is required by some lenders. In general, a larger down payment means a smaller loan amount and lower monthly payments. But the size of your monthly payment is also affected by the length of the loan. Typically, the longer the term, the smaller the monthly payment.

Curious about how much you might have to pay? If you already have your eye on a car, you could use an online car payment calculator. Just plug in the car price, down payment, interest rate, and repayment term, and the calculator will show you the monthly payment, total interest you would pay, and the total cost of the car payments over the lifetime of the loan.

Include the cost of car insurance

The cost of car insurance varies greatly depending on many factors, including where you live. Each state sets its own insurance requirements and oversees the prices that companies charge. In addition, the cost of insurance could also be affected by your driving history, age, and other details.

To find out what you might pay, you can contact an insurance agent and tell them which car you’re considering. You can also search online at various sites to calculate insurance premiums. This table from NerdWallet shows the minimum car insurance requirements by state.

There could be many ways to save on the cost of car insurance, such as increasing your deductible, taking advantage of “good driver” and multipolicy discounts, or comparing rates among insurers. Don’t hesitate to have a conversation with your insurance provider to make sure you get the best deal for your situation.

Consider your fuel costs

The cost of gas is likely to be a primary factor in your monthly expenses. Depending on how much you drive and where you live, you might spend hundreds of dollars per month on fuel alone. (You can use the U.S. Energy Information Administration website to see national and regional average gas prices.)

It’s important to consider this expense when buying a car, as fuel efficiency varies by model. If this is a determining factor for you, you can consult a list of the most fuel-efficient vehicles, such as this recent Consumer Reports analysis. Fueleconomy.gov also lets you look up the miles per gallon for a specific make and model or find cars that get a specified minimum number of miles per gallon.

Although the fuel costs for electric vehicles (EVs) may be lower, most consumers still focus on gas-powered vehicles when shopping for new or used cars. The purchase of gas-powered cars accounted for more than 92% of the U.S. market in 2023. But EVs may offer significant savings, with government data showing that the average electric vehicle can travel 4.4 times farther on a given amount of energy than the average gasoline car.¹

Be prepared for maintenance and repairs

Of course, everyone hopes that nothing goes wrong with their vehicle. But we all end up at the garage now and then.

Even if your car doesn’t need big repairs, you’ll still have to pay for basic upkeep. For a car, or even for some alternative vehicles, that could include a new battery, tires, brakes, regular oil changes, and state inspections. These costs vary based on your vehicle, where you get it serviced and how often, and if a repair is covered by warranty or insurance.

Researching which cars are most reliable might also be helpful. The less time your car spends at the mechanic, the better. Consumer Reports keeps an up-to-date Guide to Car Reliability that can help identify cars with a record of good long-term performance.

If you find yourself facing a critical auto repair such as a catalytic converter, transmission, or water pump replacement, you don’t want to wait. The first thing to do is check if it’s covered by an active warranty (either standard or extended) or by your insurance. Then, do your research or ask your friends to recommend an auto mechanic you can trust to give you a fair deal and a good repair. If you need help covering these costs, see if a personal loan would help your budget. 

*Calculated with data from AAA and base don driving 15,000 miles per year²

**Average MSRP of a new car in 2023, according to AAA

***Average auto loan interest rate for a new car in the fourth quarter of 2023³

Don’t forget depreciation

Although it’s not an out-of-pocket expense, one of the biggest eventual costs of owning a car is depreciation—or the fact that it will lose value over time.

Fortunately, there are a couple of things you can do to lessen the effect of depreciation:

• Buy a used car, since much of the depreciation occurs when it leaves the showroom the first time
• Buy a car that holds its value better than the competition

The first point is evident, but the second one might take some research. Each year, Kelley Blue Book shares its “Best Resale Value Awards” list. You can search by brand, overall top 10 winners, and category winners to find out which cars are more likely to have high trade-in or resale values.

Keep in mind that EVs are different

Although the cost of a new EV may set you back more than a comparable gas-powered car, the price gap is narrowing. In fact, the average price of an EV has fallen nearly $15,000 through 2023.

Also, since electric cars are less mechanically complex than gas-powered cars, EVs typically require less standard maintenance,⁴  with potential savings adding up to hundreds of dollars a year. EV tax credits and rebates may also be available from federal and state agencies for many models of cars, depending on the type of vehicle, your income, and where you live.⁵

Despite those potential savings, there can be additional upfront expenses associated with owning an EV. Installing a Level 2 (240-volt) charging station at home costs about $2,000 for a single-car station, according to Kelley Blue Book.⁶  And there may be additional expenses if your home’s electric line needs to be adjusted. Additionally, the issue of battery replacement may lead EVs to lose their value faster than gas-powered cars.

So, what is the true cost of owning a car?

The answer: it depends. In addition to your purchase price, there are lots of items to consider in order to budget wisely, including fuel costs, loan payments, maintenance, and vehicle registration fees.

That’s why it can be helpful to make a list of all the potential expenses. Customize your list based on the vehicles you’re considering. That way you can assess whether the car you want fits your budget.

For some people, car ownership might help expand financial opportunities by making it easier to get to work or school. The additional convenience may bring long-term benefits, but it’s important to plan for your budget as it is now.

After that, you might decide public transportation or other options are more affordable in the short term and better suited for your situation. Many cities are bike friendly, and of course walking is good for your wallet, the environment, and your health.

Depending on your decision, and if you need help covering the costs of car ownership, you can always consider applying for a personal loan. Discover® Personal Loans offers loans in amounts from $2,500 to $40,000, and the funds can be sent as soon as the next business day after your acceptance. While Discover doesn’t offer auto loans, funds from a Discover personal loan can be used for ongoing car expenses and emergency repairs.

Once you have a handle on what you need in order to cover these additional expenses, start here to estimate your monthly loan payments to find an option that works for you.