What a Car Actually Costs: The Sticker Price Is About a Third of It
Buyers negotiate hard over the purchase price and ignore the four costs that dwarf it. Over five years, the largest expense of owning a car is one nobody ever writes a cheque for.
By Mohammed Jamil · Wed Jul 29 2026
Car buyers spend weeks comparing models and hours haggling over the price. Almost none of them calculate what the vehicle will cost over the time they own it — which is a shame, because the purchase price is roughly a third of the answer.
The five costs
Take a car bought for 120,000 and kept for five years, financed with 20% down at a 5% flat rate.
1. Depreciation. The largest cost by far, and the only one you never receive a bill for. A new car typically loses around 20% in its first year and 15% a year after that. Our 120,000 car is worth roughly 50,000 after five years — a loss of 69,887, or about 1,165 every month.
2. Financing. A 96,000 loan at 5% flat over five years costs 24,000 in interest. Note that this is a flat rate — the true reducing-balance equivalent is closer to 9%, which is a separate trap worth understanding before you sign.
3. Insurance. Around 6,000 a year for a car at this value: 30,000 over five years.
4. Fuel. At 9,000 a year for average use: 45,000.
5. Maintenance, servicing, tyres and registration. Around 3,000 a year, rising sharply once the warranty ends: 15,000.
The total
| Cost | Five years | Per month |
|---|---|---|
| Depreciation | 69,887 | 1,165 |
| Financing | 24,000 | 400 |
| Insurance | 30,000 | 500 |
| Fuel | 45,000 | 750 |
| Maintenance | 15,000 | 250 |
| Total | 183,887 | 3,065 |
A car advertised at 120,000 costs about 184,000 to own for five years — around 3,065 a month, against a loan instalment of roughly 2,000. The monthly payment describes barely two-thirds of the real cost.
Why depreciation is invisible
It is the biggest number in the table and the one nobody feels, because it never leaves your account. You discover it in a single moment years later, when a dealer makes you an offer that seems insultingly low.
It is also the cost most affected by what you buy rather than how you drive:
- New versus lightly used. Buying a two-year-old car lets someone else absorb the steepest part of the curve. The same model at three years old will have lost around 40% of its value — and the next five years of depreciation on it are far gentler.
- Model matters enormously. Depreciation varies from under 10% a year on models with strong resale demand to over 25% on those without. This gap is larger than any discount you will negotiate.
- Specification and colour. Unusual configurations are harder to sell. That distinctive colour costs real money at resale.
The questions that actually matter
Before buying, work out:
- What will this specific model be worth in five years? Look up what the equivalent five-year-old car sells for today — that is your best available estimate.
- What is the insurance quote? Get it before committing, not after.
- What does a major service cost once the warranty ends, and when does that happen?
- Is that finance rate flat or reducing?
Those four answers will change your decision more than any negotiation over the sticker price.
The comparison nobody makes
The honest way to compare two cars is total cost of ownership per month, not purchase price. A 140,000 car that holds its value well and is cheap to insure can be materially cheaper over five years than a 120,000 car that does not and is not.
It takes about twenty minutes with a spreadsheet, and it is worth more than every hour spent in the showroom.
To check whether a finance offer is quoted flat or reducing — and what the difference costs you — use our loan calculator.