The Real Cost of Owning a Car Over 5 Years
Owning a car is not just about “can I handle the monthly payment?”. The real cost of owning a car per month includes everything you pay to keep that car on the road and available: depreciation, interest, insurance, fuel, maintenance, taxes, and small “lifestyle” extras that add up. If you ignore those, you underestimate the cost and overestimate how much car you can safely afford.
This guide walks through the true cost of owning a car over five years. You will see a clear car ownership cost breakdown, example numbers at different price points, and a simple way to estimate your own 5-year cost of car ownership and car cost per km. The goal is not to scare you away from cars, but to make the decision grounded, realistic, and robust.
By the end, you will know how to translate a sticker price into a total five-year cost and an all-in monthly cost, and how tools like Car Budget Guard and its report can automate the heavy math so you can focus on the decision.
Why you must think in 5-year cost, not just monthly payment
Most buyers anchor on the monthly payment because that is how dealers, lenders, and online marketplaces frame the offer. You see a large price, then a much smaller number like “only 399/month”, and your brain latches onto the smaller figure. The problem is that the monthly payment on its own tells you almost nothing about the true cost to own the car.
A low monthly payment can hide a huge total cost. Long loan terms reduce the payment but stretch interest over many years. When you layer in insurance, fuel, maintenance, and taxes, two cars with similar payments can have very different total five-year costs and very different risks for your budget.
Consider a simplified contrast:
- Car A has a higher monthly payment, shorter loan term, reasonable interest rate, and holds its value relatively well.
- Car B has a lower monthly payment because the loan term is much longer and the rate is slightly higher, and it depreciates faster.
On paper, Car B “fits the budget” better because the payment is lower. Over five years, the total interest paid, the extra years of payments, and the weaker resale value can make Car B thousands of dollars more expensive. You may also be stuck with the loan for longer than you want to keep the car.
Decision quality improves when you step back from “what payment can I squeeze in?” and instead look at:
- 5-year total cost of ownership (TCO)
- Average cost of owning a car per month (all-in)
- Cost per km over the same period
This is the lens you should use to decide whether you can afford a car, which car to pick, and how aggressive you can be with price and loan term.
The six major components of car ownership cost
To make the true cost of owning a car manageable, break it into six major components. This is the same structure that underpins Car Budget Guard’s modeling and reports.
Depreciation – the invisible but biggest cost on many cars
Depreciation is the value you burn over time as the car ages and accumulates kilometres. Even if you pay cash and never take a loan, depreciation is real: you convert money into a car and then the car is worth less every year.
New cars typically lose value fastest in the first years. A brand-new car can easily lose 15–25% of its value in the first year and another 10–15% over the next couple of years. After that, the curve flattens but the car continues to depreciate until it reaches a lower plateau.
Used cars have already gone through the steep early drop, but they still depreciate. A sensible planning rule for many mass-market used cars is that they will lose a moderate single-digit percentage of their value each year, plus extra if you drive high kilometres or neglect maintenance.
A simple way to approximate depreciation for planning:
- For a relatively new car, assume it will lose roughly half of its purchase price over five years.
- For a modest used car, assume total 5-year depreciation of 30–40% of purchase price.
You do not need perfect precision. What matters is that you treat depreciation as a real line item when you calculate the 5-year cost of car ownership.
Financing and interest
If you take a loan, your monthly payment has two components: principal (repaying the amount you borrowed) and interest (the price you pay the lender). The total interest you pay depends on:
- Loan amount
- Annual interest rate
- Loan term in months
Long terms and higher rates inflate the true cost even when the monthly payment looks manageable.
For example, take the same $24,000 loan at 7% annual interest:
| Loan term (months) | Approx. monthly payment | Approx. total interest paid |
|---|---|---|
| 48 | $575 | $3,600 |
| 60 | $475 | $4,500 |
| 72 | $410 | $5,500 |
| 84 | $360 | $6,400 |
Nothing about the car changes. You just stretch the term and you quietly add nearly $3,000 of extra interest. That extra interest becomes part of your 5-year total cost.
Very long terms (72–84 months) are especially dangerous when combined with fast-depreciating cars. You can end up in negative equity, where you owe more on the loan than the car is worth, which makes it hard to sell or trade in without bringing extra cash.
Insurance
Insurance is a fixed monthly and annual cost that many buyers underestimate when they think about the average cost to own a car. Premiums depend on:
- Driver profile (age, driving history, claims)
- Location (city vs rural, theft and accident risk)
- Car type and value (sports car vs compact, new vs old, gas vs EV)
- Usage (annual kilometres, commute type, business vs personal)
Newer and more expensive cars tend to carry higher premiums, especially if you choose comprehensive coverage, low deductibles, or add optional protections. Some models (performance cars, SUVs, certain EVs) are outliers with significantly higher insurance costs.
For TCO purposes, you need a realistic annual insurance number, not an optimistic one. It is safer to slightly round up your estimate rather than assume you will find a “cheap” policy that may not actually be available for your profile and car.
Fuel or energy
Fuel or energy is highly usage-driven. Two drivers with identical cars can have very different monthly fuel costs because one drives 10,000 km per year and the other drives 25,000 km per year.
The core variables are:
- Average fuel consumption in litres per 100 km (L/100 km)
- Annual kilometres driven
- Average fuel price per litre
For a petrol or diesel car, a basic formula is:
Annual fuel cost ≈ (annual km ÷ 100) × L/100 km × fuel price per litre
For an EV or plug-in hybrid, you replace litres with kWh per 100 km and your electricity price per kWh. The idea is the same.
This component is critical when comparing “cheap to buy, expensive to run” cars with more efficient but pricier options. A car with a low price but poor fuel economy can end up more expensive per km over five years if you drive a lot.
Maintenance and repairs
Maintenance and repairs cover:
- Routine items: oil changes, filters, tires, brakes, fluids, basic inspections
- Wear-and-tear replacements: suspension parts, batteries, exhaust components
- Unplanned repairs: breakdowns, electronic failures, larger mechanical issues
Newer cars under warranty tend to have lower out-of-pocket repair costs in the first years, but they still require routine maintenance. Older cars out of warranty may have higher repair risk, even if depreciation slows down.
For planning, you can use rough annual ranges by car age and type. For example:
- Relatively new, mainstream car: a few hundred per year for routine items, rising as it ages
- Older, higher-kilometre car: plan on a higher annual buffer to absorb occasional repairs
The exact numbers do not have to be perfect. The key is to include maintenance and some contingency for repairs in your 5-year cost model instead of assuming “nothing big will break.”
Taxes, fees, and extras
Finally, there are taxes, fees, and lifestyle costs tied to car use:
- Purchase taxes and dealer or registration fees when you buy the car
- Annual registration, inspections, and mandatory testing where applicable
- Parking (home, work, city), toll roads, and congestion charges
- Occasional extras: car washes, accessories, winter tires, small upgrades
Purchase-time taxes and fees are often a fixed percentage of the car price. Over five years, they meaningfully change your effective total cost. The ongoing items are smaller individually but steady.
When you combine all six components, you get a realistic car ownership cost breakdown that you can roll up into:
- 5-year total cost of ownership
- All-in monthly cost of owning the car
- Cost per km over the period
Example 5-year cost breakdowns at different car prices
To make the concepts concrete, the tables below show three simplified scenarios. All amounts are in $, use metric units, and are rounded for clarity. They are illustrative, not predictions.
Common assumptions:
- Fuel price: $1.30 per litre
- All cars use mainstream, non-luxury models
- Taxes and purchase-time fees: ~10% of purchase price
- No extreme outlier events (major accidents, total loss, etc.)
Scenario A – $15,000 used car, modest usage
Assumptions:
- Purchase price: $15,000 (used compact car)
- Down payment: $3,000; loan amount: $12,000
- Loan: 60 months at 6% annual interest
- Annual kilometres: 12,000 km
- Fuel consumption: 7.5 L/100 km
- Insurance: $900 per year (mid-range profile)
- Maintenance and repairs: $800 per year (older but reliable car)
- Annual registration/fees: $300 per year
- Depreciation over 5 years: 40% of purchase price ≈ $6,000
- Purchase-time taxes and fees: ~$1,500
5-year cost breakdown:
| Category | 5-year total ($) |
|---|---|
| Depreciation | 6,000 |
| Loan interest | ~1,900 |
| Insurance | 4,500 |
| Fuel | ~5,850 |
| Maintenance and repairs | 4,000 |
| Registration and annual fees | 1,500 |
| Purchase-time taxes/fees | 1,500 |
| Total 5-year cost | ≈25,300 |
Derived metrics:
- Average cost of owning this car per month is about $420.
- Total km over 5 years: 12,000 × 5 = 60,000 km.
- Car cost per km (all-in) is roughly $0.42/km.
Note that the loan payment is only part of this. The monthly loan payment in this scenario is around $230, but the true cost of owning the car per month is roughly $420 once you add everything else.
Scenario B – $30,000 newer car
Assumptions:
- Purchase price: $30,000 (newer compact or small crossover)
- Down payment: $10,000; loan amount: $20,000
- Loan: 60 months at 6% annual interest
- Annual kilometres: 15,000 km
- Fuel consumption: 7.0 L/100 km (slightly more efficient)
- Insurance: $1,200 per year (higher value car)
- Maintenance and repairs: $950 per year (mix of routine and some repairs)
- Annual registration/fees: $350 per year
- Depreciation over 5 years: ~55% of purchase price ≈ $16,500
- Purchase-time taxes and fees: ~$3,000
5-year cost breakdown:
| Category | 5-year total ($) |
|---|---|
| Depreciation | 16,500 |
| Loan interest | ~3,200 |
| Insurance | 6,000 |
| Fuel | ~6,800 |
| Maintenance and repairs | 4,750 |
| Registration and annual fees | 1,750 |
| Purchase-time taxes/fees | 3,000 |
| Total 5-year cost | ≈42,000 |
Derived metrics:
- Average cost per month is about $700.
- Total km over 5 years: 15,000 × 5 = 75,000 km.
- Car cost per km is roughly $0.56/km.
The monthly loan payment here is around $385. The true cost of owning the car per month is about $700. The payment gap between Scenario A and B is roughly $150/month, but the TCO gap is almost $280/month.
Scenario C – $40,000 car on long-term loan
Assumptions:
- Purchase price: $40,000 (larger or more premium car)
- Down payment: $8,000; loan amount: $32,000
- Loan: 84 months at 8% annual interest (long term, higher rate)
- Annual kilometres: 18,000 km
- Fuel consumption: 8.5 L/100 km (heavier car)
- Insurance: $1,500 per year
- Maintenance and repairs: $1,300 per year
- Annual registration/fees: $400 per year
- Depreciation over 5 years: ~60% of purchase price ≈ $24,000
- Purchase-time taxes and fees: ~$4,000
For this long-term loan, the monthly payment is around $500. Over the first five years (60 months), you pay roughly:
- ~$8,900 in interest
- ~$21,000 in principal, with more than $11,000 of loan balance still outstanding at year five
5-year cost breakdown (excluding the remaining loan balance):
| Category | 5-year total ($) |
|---|---|
| Depreciation | 24,000 |
| Loan interest (first 5 years) | ~8,900 |
| Insurance | 7,500 |
| Fuel | ~9,950 |
| Maintenance and repairs | 6,500 |
| Registration and annual fees | 2,000 |
| Purchase-time taxes/fees | 4,000 |
| Total 5-year cost (excluding remaining balance) | ≈62,900 |
Derived metrics:
- Average cost per month is roughly $1,050.
- Total km over 5 years: 18,000 × 5 = 90,000 km.
- Car cost per km is around $0.70/km.
You also still owe more than $11,000 on the loan after those five years. If you need to sell or trade in around that time, you carry meaningful negative equity risk if the car’s market value is below your remaining balance.
Wrap-up comparison
Putting the three scenarios side-by-side makes the trade-offs visible:
| Scenario | 5-year TCO ($) | Avg. monthly cost ($) | 5-year km driven | Cost per km ($/km) |
|---|---|---|---|---|
| A – $15,000 used compact | ≈25,300 | ≈420 | 60,000 | ≈0.42 |
| B – $30,000 newer car | ≈42,000 | ≈700 | 75,000 | ≈0.56 |
| C – $40,000 car, 84-month loan (5-yr view) | ≈62,900 | ≈1,050 | 90,000 | ≈0.70 |
The “more expensive” car is not just a slightly higher payment. Once you count depreciation, fuel, insurance, and repairs, the difference between Scenario A and Scenario C is over $600 per month on average and almost $0.30 per km. This is what you need to see before committing to a price and loan structure.
How to estimate your own 5-year car ownership cost
You can build a reasonable 5-year TCO estimate for any car with a simple, structured process. The Car Budget Guard calculator automates these steps, but it is useful to understand the logic.
Step 1 – Estimate your annual kilometres
Start with a realistic view of how much you will drive:
- Daily commute: round-trip distance × workdays per month
- Regular errands: grocery runs, local trips
- Weekends and leisure: typical weekend driving
- Occasional road trips: averaged over the year
Add these up to get an annual estimate. Then sanity-check against typical ranges:
- Low usage: under 10,000 km per year
- Medium usage: 10,000–20,000 km per year
- High usage: above 20,000 km per year
Your usage band is critical: a high-usage driver will feel fuel, maintenance, and depreciation more strongly than a low-usage driver, even with the same car.
Step 2 – Estimate fuel or energy cost
Using your annual km and the car’s rated or realistic fuel consumption:
- Find or estimate the car’s average consumption in L/100 km (or kWh/100 km for EVs).
- Decide on a conservative average fuel price per litre (or electricity price per kWh).
- Apply the formula:
- Annual fuel cost ≈ (annual km ÷ 100) × L/100 km × price per litre.
Convert this annual figure into a monthly cost by dividing by 12. For TCO, multiply the annual figure by five years, or model a slightly higher number for later years if you expect fuel prices to rise.
Step 3 – Get realistic insurance quotes
For insurance:
- Use online tools or brokers to get 2–3 quotes for the type of car you are considering, using your actual profile and likely usage.
- Focus on annual premium amounts, not just installment payments.
- Round your planning number slightly up rather than down to create a safety margin.
Some models and trims can be significantly more expensive to insure than others in the same price band. If one option drives a much higher premium, that needs to be reflected in your 5-year cost comparison.
Step 4 – Set maintenance and repair assumptions
Estimate maintenance and repair costs based on the car’s age, type, and expected reliability:
- New or nearly new car: plan for routine maintenance plus a buffer for tires and brakes.
- Mid-life used car: add more buffer for wear-and-tear and occasional repairs.
- Older, higher-kilometre car: plan on a higher annual amount to absorb potential issues.
A practical approach is to set:
- A base annual maintenance amount for routine items.
- An additional contingency buffer for unplanned repairs.
Multiply your annual figure by five to get a 5-year total and convert to monthly if needed.
Step 5 – Factor in depreciation and financing
For depreciation:
- Estimate the current price and a conservative resale value after five years.
- Subtract to get the depreciation amount.
If you do not have detailed data, use simple percentages (for example, “this car will probably be worth around half of what I pay for it in five years”) and err on the cautious side.
For financing:
- Decide on down payment, loan term, and expected interest rate.
- Use a loan calculator or a tool like Car Budget Guard to compute:
- Monthly payment
- Total interest paid over the period
- Include the total interest as a separate line in your 5-year cost.
Finally, build a simple table:
| Category | 5-year cost ($) |
|---|---|
| Depreciation | |
| Loan interest | |
| Insurance | |
| Fuel or energy | |
| Maintenance & repairs | |
| Taxes & fees | |
| Total 5-year cost |
From there, you can derive:
- Average monthly cost = total 5-year cost ÷ 60.
- Total km over five years = annual km × 5.
- Car cost per km = total 5-year cost ÷ total km.
A dedicated calculator can perform exactly this aggregation, consistently, and show how the numbers shift when you change assumptions.
Cost per kilometre as a decision metric
Cost per km compresses the entire 5-year picture into a single, comparable metric:
Cost per km = total 5-year cost ÷ total km driven over 5 years
This metric lets you compare very different cars on equal footing. For example:
- An older car with low purchase price and little depreciation but higher repairs.
- A newer car with high depreciation but lower fuel and maintenance.
Suppose the older car costs $18,000 over five years and you drive 60,000 km. The cost per km is $0.30. A newer car may cost $30,000 over the same period and 75,000 km of driving, for $0.40 per km. Even if the newer car feels smoother and more modern, the older one may be substantially cheaper on a per-km and per-month basis.
Cost per km does not replace all other metrics. You still need to respect safety, reliability, and your own tolerance for risk and downtime. But as a hard financial signal, it is very effective for:
- Comparing multiple models and price points.
- Deciding whether to keep your current car or upgrade.
- Assessing whether a more efficient but pricier car actually saves money over your usage profile.
Car Budget Guard’s reports compute cost per km as part of the 5-year TCO analysis so you can see this signal directly instead of manually crunching the numbers.
Where Car Budget Guard fits into this picture
The logic described so far is exactly what Car Budget Guard implements and scales for you.
Instead of manually building spreadsheets, the Car Budget Guard calculator takes your real financial and usage inputs:
- Net monthly income and non-car expenses
- Savings and monthly savings contributions
- Planned down payment, loan term, and interest rate
- Monthly insurance, fuel, and maintenance budgets
- Monthly kilometres driven
Based on these, it computes:
- A realistic safe price range for your next car.
- The resulting monthly loan payment and all-in car expenses.
- The 5-year total cost of ownership and cost per km across all six components (depreciation, interest, insurance, fuel, maintenance, fees).
The free calculator view lets you experiment with your numbers in the Car Budget Guard calculator and see how different price points and loan terms change your monthly cost and 5-year TCO. When you need deeper analysis, the $4.99 report adds:
- Detailed yearly and 5-year breakdown tables.
- Visuals that highlight affordability bands, risk levels, and stress tests.
- Scenario comparisons (for example, “car $5,000 cheaper”, “shorter term”, or “wait and increase down payment”).
This lets you make the same data-driven decision every finance professional would want to see, but without building a model from scratch.
When the numbers say “do not buy yet”
Sometimes the most valuable output of a 5-year TCO analysis is a clear “not yet”. That is exactly the moment where independent, conservative tools diverge from dealer incentives.
Red flags in 5-year cost terms include:
- The all-in cost of owning the car per month takes an unsustainably high share of your net income.
- Your remaining monthly cash after all expenses, including car costs, is thin or nonexistent.
- The 5-year TCO combined with a large down payment leaves your savings dangerously low.
- Stress test scenarios (fuel up, insurance up, temporary income drop) quickly push your budget into negative territory.
A typical “fail” scenario might be a household that technically gets approved for a $40,000 car on a long-term loan. The monthly payment fits the bank’s rule of thumb, but the TCO analysis shows $1,000+ per month going into the car and little buffer for shocks such as job change, rent increase, or childcare costs.
In these cases, the rational options are to delay the purchase, target a cheaper car, increase the down payment, or choose a shorter term. A tool like Car Budget Guard is explicitly designed to surface these risks before you sign anything, not after you are locked in.
Next steps: use TCO to negotiate and choose smarter
Once you have a 5-year TCO view, you are in a much stronger position:
- You see that 5-year cost is the real metric and that the monthly payment is just one slice of the picture.
- You understand how depreciation, insurance, fuel, and maintenance can outweigh the price difference between two cars.
- You know your safe price range and the all-in cost of owning a car per month that your budget can support.
The practical next steps are straightforward:
- Run your own scenarios in the Car Budget Guard calculator using realistic inputs for income, expenses, and car usage.
- Review a sample report to understand how five-year costs, cost per km, and risk levels are presented.
- If you are within 3–6 months of a purchase decision, use a full report to stress-test your preferred car and deal structure before you walk into a dealership or sign with a lender.
From there, you can connect this TCO lens to broader questions:
- “How much car can I really afford?” (affordability framework and safe price ranges).
- “Should I keep my existing car or buy a newer one?” (TCO vs TCO).
- “Is an EV actually cheaper than a gas car for my driving pattern?” (drivetrain-specific TCO).
Once you start making decisions on five-year cost and cost per km, it becomes very hard to go back to “I just picked what payment looked okay on paper.” That is the entire point.