How much does it cost to own a car per month?
A car costs far more than gas and the loan payment. Here is how to add every cost, get a monthly figure and a cost per mile, and decide with numbers.
Ask someone what their car costs and you will often hear "about $100 a month in gas". That is only one piece. Insurance, registration, repairs, parking and the value the car loses every year add up to much more, which is why a budget feels tight for no obvious reason. The method below turns everything into one number per month and one per mile.
Illustrative figures: the numbers here were picked to show the math. They are not national averages or current prices. Redo them with your own receipts. General information, not professional advice.
Two groups of costs
Fixed costs exist whether you drive or not: insurance, registration and taxes (these vary by state and city), the loan payment if you have one, and depreciation. Variable costs grow with use: fuel, maintenance and tires, parking, tolls, washing and tickets.
Depreciation, the cost nobody pays monthly
A car loses value every year. The money does not leave your account each month, but it disappears when you sell. To estimate it, look at listings for the same model with one more year of use and compare the prices. It is often the biggest fixed item, and the most forgotten.
A worked example
A car driven 800 miles a month, 28 miles per gallon, gas at $3.50 per gallon (made-up numbers):
| Item | Per year | Per month |
|---|---|---|
| Insurance | $1,800 | $150.00 |
| Registration and taxes | $300 | $25.00 |
| Depreciation ($2,500 a year) | $2,500 | $208.33 |
| Fixed subtotal | $4,600 | $383.33 |
| Gas (800 mi ÷ 28 mpg = 28.6 gal × $3.50) | $1,200 | $100.00 |
| Maintenance and tires | $1,080 | $90.00 |
| Parking and tolls | $720 | $60.00 |
| Washing | $120 | $10.00 |
| Variable subtotal | $3,120 | $260.00 |
| Total | $7,720 | $643.33 |
$643.33 a month over 800 miles is about $0.80 per mile. Gas, which looked like the main cost, is only 16% of the total in this example ($100 of $643.33).
How to calculate yours
- Gather last year's receipts: insurance, registration, repair shop, tires, tolls.
- Estimate depreciation from the price gap between listings of the same model.
- Work out fuel: miles per month ÷ miles per gallon × price per gallon.
- Add everything that is yearly and divide by 12.
- Divide the monthly total by the miles driven to get the cost per mile.
What the cost per mile is for
It lets you compare with other ways of getting around. But compare only what actually changes: if the car stays parked on some trips, what you save is the variable part. Insurance, taxes and depreciation keep going. The honest comparison is the variable cost per mile against the price of the alternative trip, and the total cost against the option of owning no car.
Where you can usually cut
- Insurance: get quotes from more than one insurer and match deductible and coverage to the car's value. See how to lower your car insurance.
- Preventive maintenance: doing what the manual says usually costs less than repairing after a breakdown.
- Tire pressure: under-inflated tires use more fuel and wear out faster.
- Short trips: combining errands into one outing cuts miles and parking.
- Parking: compare monthly passes and street spots against paying daily.
Common mistakes
- Counting only gas and the loan payment.
- Forgetting yearly bills that arrive in one lump and throw off the month. Set aside 1/12 each month, as in sinking funds explained.
- Ignoring depreciation because it "does not show up on the statement".
- Comparing the full cost of owning a car with the price of a single ride.
Using the number to decide
Keep the current car or swap it?
Estimate the monthly cost of the car you want with the same table and compare it with the current one. A newer car usually costs less in maintenance and loses more value in dollars per year; an older one tends to do the opposite. Compare the two totals, not just the payment.
How much of the budget should the car take?
There is no official percentage. A practical way: add the monthly cost of the car to your other fixed bills and see whether there is still room for an emergency fund and for debt payments. If the car blocks that, it weighs too much on your income today, even if the payment fits.
What if I barely use it?
Low-mileage drivers pay a high cost per mile because the fixed costs are spread over few miles. In the example, if the car were driven 320 miles a month instead of 800, and the variable part fell in the same proportion (an approximation, since a monthly parking pass does not shrink), variable costs would go from $260 to $104. The fixed part, $383.33, would stay the same. The total would be $487.33, or about $1.52 per mile. In that situation it is worth comparing with rides, occasional car rental or public transit.
With the number in hand, the car stops being a feeling of squeeze and becomes a decision: keep it, swap it for a cheaper one, or mix it with other ways of getting around. To fit the amount into your month, use the zero-based budget.
Frequently asked questions
Which costs count when you own a car?
Fixed costs (insurance, yearly registration and taxes, depreciation, the loan payment if you have one) and variable costs (fuel, maintenance, tires, parking, tolls, washing, tickets). Add up the whole year and divide by 12.
What is depreciation and why count it?
It is the value the car loses over time. It does not leave your account each month, but you feel it when you sell. A simple estimate: compare listings of the same model that is one year older.
How do I know if rides or transit would be cheaper?
Work out your cost per mile and compare it with what you would really spend on the trips the car would no longer make. Fixed costs stay as long as you own the car, so only the variable part disappears when it sits parked.
Should loan interest be included?
Yes. The full payment is a real cost. If you paid cash, consider also what that money could have earned elsewhere, as an opportunity cost.
Insurance looks heavy in the total? See how to lower it without losing coverage.