What costs are included in true cost to own?

Purchase price, fuel (from your miles and MPG), insurance, maintenance, and resale value recovered at the end. The classic depreciation-based method used here intentionally replaces the full price with what you actually lose: price minus resale.

Why does depreciation matter so much?

It is typically the largest ownership cost — roughly 44% of a car’s value disappears in five years at 15% a year. Two cars with identical payments can have very different ownership costs purely because one holds its value.

Can I use this for a used car?

Yes. Enter the used price, raise the MPG assumptions if the drivetrain is worn, and consider lowering the depreciation rate slightly, since the steepest first-year drop has already happened.

What about financing interest?

This model assumes a cash purchase. To fold in a loan, add total interest — roughly the payment times months minus the amount borrowed — to the five-year total. Sales tax and registration, another common omission, add several percent of the price.

What is a good cost per mile?

Most mainstream sedans land between $0.45 and $0.65 per mile over five years; trucks and luxury vehicles run higher. If your figure approaches the IRS mileage rate, the car is consuming what a business would reimburse per mile.

How do I estimate maintenance costs?

Budget $500–$700 a year for a mainstream car averaged over five years — cheap early, expensive late as tires, brakes, and major services land. Manufacturer maintenance schedules and repair forums for the exact model sharpen the estimate.

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The sticker price is just the entrance fee

AAA’s annual ownership studies consistently find the full cost of driving runs two to three times the fuel bill once depreciation, insurance, and maintenance are counted. The purchase price sets all of those in motion — expensive cars depreciate in dollars, cost more to insure, and often wear pricier parts.

The five-year sum

TCO = price + fuel + insurance + maintenance − resale. Fuel comes from your driving: annual miles ÷ MPG × price per gallon — 12,000 miles at 28 MPG and $3.50 gas is exactly $1,500 a year. Resale assumes the car loses 15% of its remaining value each year, the standard first-order model for vehicles past their first birthday.

Cost per mile: the great equalizer

Dividing the five-year total by miles driven (60,000 on defaults) yields roughly $0.55 per mile — a useful yardstick against the IRS business mileage rate, rideshare pricing, or a rival vehicle. Low-mileage drivers spread fixed costs over fewer miles, so their per-mile figure climbs even as annual costs fall.

Worked example

A $30,000 sedan, 12,000 miles a year, 28 MPG, $3.50 gas.
Fuel: 12,000 ÷ 28 × $3.50 = $1,500/yr → $7,500 over five years.
Insurance $6,000 + maintenance $2,500; resale ≈ $13,311.
TCO = 30,000 + 7,500 + 6,000 + 2,500 − 13,311 = $32,689 ≈ $0.55/mile.

How to use it

Enter the out-the-door price you would actually pay.
Fill in annual miles, combined MPG, and your local fuel price.
Use your real insurance premium and a realistic maintenance average.
Compare the five-year totals — and the per-mile figure — across candidates.