A few years ago a friend of mine bought a used Honda Accord for $18,500. He was pleased with himself. He had negotiated the price down from $21,000 and felt like he had won something.
Two years later he told me the car had cost him closer to $31,000 so far. He had not done anything wrong. He had just never added up the other numbers.
What the sticker price does not include
The purchase price of a car is the beginning of the financial relationship — not the summary of it. What follows is a series of recurring costs that most buyers estimate loosely if at all.
Insurance. The national average for full coverage auto insurance in 2025 is approximately $2,314 per year. For a driver under 30 on a newer vehicle it runs significantly higher — often $3,000 to $4,500 annually. Most people know roughly what they pay but have not multiplied it by the number of years they plan to own the vehicle.
Fuel. At 15,000 miles per year and 28 miles per gallon at $3.50 per gallon — a conservative estimate in most US markets — annual fuel cost runs approximately $1,875. Over five years that is $9,375 in fuel alone on a car that many buyers mentally filed under paid for.
Maintenance. The general rule of thumb is 1-2% of the vehicle's purchase price per year in maintenance costs. On an $18,500 car that is $185 to $370 annually at the low end — and significantly more as the vehicle ages past 80,000 miles. Tires alone run $600 to $1,200 every 40,000 to 60,000 miles.
Depreciation. This is the largest cost and the least visible one. A new car loses approximately 20% of its value in the first year and roughly 50% within five years. On a $35,000 new car that is $17,500 in depreciation over five years — $3,500 per year of value simply disappearing.
Registration and taxes. Depending on the state annual registration fees and property taxes on vehicles run $200 to $600 per year.
The real monthly number
Take a $25,000 car financed over 60 months at 7% interest. The monthly loan payment is $495. That is the number most buyers focus on when deciding whether they can afford the car.
The actual monthly cost of ownership looks different.
| Loan payment | $495 |
| Insurance | $193 |
| Fuel | $156 |
| Maintenance average | $42 |
| Registration | $33 |
| Depreciation | $292 |
| Total | $1,211 |
That is 2.4 times the loan payment. The buyer who asked can I afford $495 per month was asking the wrong question.
The used vs new calculation
The standard advice to buy used rather than new is financially sound but depends heavily on which used car and at what mileage. The sweet spot most financial advisors point to is a vehicle that is two to three years old with 25,000 to 35,000 miles. At that point the original buyer has absorbed the steepest part of the depreciation curve — typically 30 to 40% of the purchase price — and the car still has most of its reliable life ahead of it.
My friend's $18,500 Accord at 40,000 miles was actually a reasonable purchase. The number that caught him off guard was not the car itself. It was the $2,800 per year in insurance he had not fully accounted for and the $1,400 in tires he needed at 80,000 miles.
Both were predictable. Neither was a surprise in the data. They were only surprises to him because he had never run the full calculation before signing the paperwork.
One calculation worth doing before your next car decision
The most useful thing you can do before buying any vehicle is calculate the true monthly cost — not just the payment. Include insurance at your actual rate, fuel at your actual mileage, expected maintenance, registration and depreciation.
The number is almost always higher than the loan payment suggests. Sometimes dramatically higher.
Calculate the true monthly cost of any car here — free, no signup.