Indiana true cost of car ownership calculator

What this calculator adds up

Six lines, and most drivers budget for one of them.

Depreciation is the difference between what you paid and what the car is worth when you sell it. Loan interest is what the lender charges on the amount financed. Fuel is your annual mileage divided by your miles per gallon, priced at the pump. Insurance, maintenance and tyres, and registration and inspection fees are annual figures multiplied by the years you keep the car.

The tool adds the six, divides by the months to get a monthly cost, and divides by the lifetime miles to get a cost a mile. The monthly loan payment is not that figure. It is an instalment on one of the six lines, and it stops while the other five carry on.

That is the whole argument of this page. A car with no payment is not a car with no cost.

The worked example at the default inputs

The calculator opens on a $32,000 car, kept five years, sold for $15,000. There is $4,000 down and the balance financed at 7.5% over 60 months. It is driven 12,000 miles a year at 28 miles per gallon with fuel at $3.30, and it carries $1,800 of insurance, $900 of maintenance and tyres, and $250 of registration and inspection each year.

The total is $44,485 across the five years, which is $741 a month and $0.74 a mile.

Read the first two rows together. Depreciation and insurance are 58% of the cost of running this car, and neither of them responds to how carefully you drive or which pump you use. Fuel, the line that gets the most attention, is fourth by size and about a sixth of the total.

Note also what the loan payment is doing here. It is about $601 a month, so a driver budgeting from the payment alone has planned for $601 against a real cost of $741. The gap is not a rounding error. It is mostly depreciation, and nobody invoices for that.

Why is depreciation the largest line?

Because it is the price of the car minus what you get back, and on most vehicles that difference is larger than everything else in the early years.

It is invisible for two reasons. No statement arrives for it, and it is only realised at the moment you sell, trade or write the car off. Until then it looks as though nothing has happened. Then a dealer quotes a trade-in figure and five years of it lands at once.

It is also the input the total is most sensitive to, and the one hardest to know in advance. Move the resale figure from $15,000 to $12,000, changing nothing else, and the five-year total rises from $44,485 to $47,485. Move it up to $18,000 and it falls to $41,485. A $3,000 guess about a used car price five years out is worth about $50 a month either way.

So do not guess it. Look up what the same model, at the age and mileage you will be selling at, is actually listed for today. That is a real number about a real car, and it beats any percentage rule.

A second example: keeping the car longer

Change the years field from 5 to 10 and set the resale value to $6,000, which is roughly what a decade and 120,000 miles does to a car of this kind.

The ten-year total comes to $75,307. That is a bigger number and a better one: $628 a month against $741, and $0.63 a mile against $0.74. Stopping at eight years with a $9,000 resale value gives $63,578, or $662 a month.

The mechanism is worth stating plainly. Loan interest is fixed once the loan is paid off, so spreading it across ten years rather than five halves its monthly weight. Depreciation slows down: the car lost $17,000 in the first five years and only another $9,000 in the second five. Fuel, insurance, maintenance and fees carry on unchanged per year, which is why the saving is real but not dramatic.

The other side of that ledger is honest too. Maintenance on a ten-year-old car is not $900 a year. If you extend the term, raise the maintenance figure to what an older car of that model actually costs, and the tool will show you a fairer comparison.

How the loan interest is worked out

Over the months you hold the car, not over the whole loan and not prorated.

Keep the car for five years on a 60-month loan, as the defaults do, and you pay all of the interest: $5,664. Sell after three years on the same loan and the tool amortises the balance properly, charging what you actually paid across those 36 months. That is deliberately not three fifths of the total, because early payments are mostly interest, so the first half of a term costs well over half of the interest.

Stretching the term does the opposite of what it looks like. Move the loan from 60 months to 72, keeping everything else, and the monthly payment falls, but the five-year total rises from $44,485 to $45,449, because a balance is still outstanding at the end of year five. Buy the same car for cash instead, with the whole $32,000 down and no loan, and the total drops to $38,821, or $647 a month. That $5,664 gap is the price of borrowing, and it is the one line here you can remove entirely. Our loan guides cover how term and rate interact on any secured borrowing.

The mistakes that make a car look cheap

• Budgeting from the payment. The payment is $601 and the cost is $741. The difference is largely depreciation, which is 38% of the total and appears on no statement until you sell.
• Guessing the resale value optimistically. It is the most sensitive input on the page. A $3,000 error moves the five-year total by $3,000, or about $50 a month.
• Replacing the car rather than keeping it. Trading every three years on a new loan means paying the steepest part of the depreciation curve over and over, and never reaching the years when a car is cheap to own.
• Chasing fuel economy alone. Raise the figure from 28 to 40 miles per gallon and the total falls from $44,485 to $42,364. That $2,121 over five years is real, but it is worth less than a $3,000 difference in resale value.
• Leaving insurance at last year's figure. Insurance is 20% of the total here and is re-quoted annually. Our insurance section covers what actually moves a premium.
• Treating the fuel price as fixed. At $4.30 a gallon rather than $3.30 the same car costs $46,628 over five years. Pump prices are published weekly and they move.

What this calculator does not include

Stated plainly, because the gaps decide whether the figure is usable where you live:

• Parking. Not modelled. In a dense city it can be the largest line in the whole budget, and it is not on the page.
• Tolls. Not modelled either. A daily toll route is a four-figure annual cost.
• Sales tax, title, registration and dealer fees at purchase. Excluded. These are real cash at the point of sale and vary widely by state, so add them yourself.
• The rise in costs as the car ages. Insurance and maintenance are entered as flat annual figures. One number understates the later years of a long hold.
• Add-ons financed after the fact. Extended warranties, gap cover and dealer extras are not counted.
• Charging costs for an electric vehicle. The fuel line is gallons at a pump price. For an electric car, work out your own cost per mile and note that the field is standing in for it.

The tool also has no opinion about whether you should own a car at all. It prices the one you describe. Where you live changes that answer more than any input here does, and the cost of living pages are the better place to start on it.

What should you check before you buy?

• Look up a real listing for the same model at the age you plan to sell, and use that as the resale figure
• Get an insurance quote for the specific vehicle before you sign, not after
• Ask for the total finance charge on the loan, not only the monthly payment
• Use observed fuel economy for that model rather than the window sticker
• Add your own parking, tolls and purchase tax, none of which this tool counts
• Run the same car at five years and at ten to see what keeping it is worth
• Compare the result against what the same money does elsewhere in our calculators

If the answer is uncomfortable, that is the tool working. A car is usually the second largest thing a household owns and the only one guaranteed to be worth less every year.

This page describes arithmetic, not a purchase or financing recommendation, and no figure here is a quote. See the disclaimer and our methodology.