What is the 'real' monthly cost of a car?
How can I find out what these 'additional' costs will be when looking to buy a car? If you know what model you're interested in buying you can try out Edmund's True Cost To Own calculator. This will estimate the depreciation, taxes and fees, financing costs, fuel costs, insurance premiums, maintenance, repairs, and any tax credits for owning a certain model for various periods of time. You can improve the accuracy be substituting your own calculations, like if you already have an insurance quote. Consumer Reports has a useful chart to demonstrate how much each of those additional costs will add up, percentage-wise. They also list the most and least expensive cars to own.
There are a few factors I like to consider when I'm reasoning financially over my households cars. How many KMs will the car travel each year because I like to factor in how often tires will need to be changed, how much tires for my models cost as well as how gas efficient they are. Knowing how much the car is driven and in what environmental/road conditions is also important factors to know because that will help guestimate possible repairs cost. Also possible taxes should be taken in to consideration. For example a few years ago I had a diesel Citroen C5 that had yearly taxes of roughly 500$. The replacement costs only 150$ a year in taxes. So switching cars 3 years early would have saved me 1050$ in taxes. So some information on possible taxes, how far you drive each year, what environmental conditions, type of driving (daily long rides or just short etc..) as well as the fuel efficiency of both cars would help to better calculate your costs for say three scenarios. Car change in 12, 24 and 32 months respectively. You know how your cell phone battery gets shittier and shittier over time until you either get a new phone or buy a new battery? Well the same thing will happen to your car. And a new battery will cost $10k. And what will we do with the old one that's full of toxic chemicals?  There are still many challenges for electric cars. It depends how detailed you want to get in your calculation, but fundamentally, 1K < 25K.   On a very basic level, divide the cost (less what you sell it for) by the time you'll have the car for.  If you junk it, $1K/12 month = $83/month to buy tires to have a car for a year. If you sell it for $1K, then it become $0/month.  (Plus other maintenance, etc..., obviously). If you pay 25K and keep the new car for ten years and sell it for nothing, it becomes roughly $208/month (plus maintenance). If you want to get more accurate, there are a lot of variables you can take into account--time cost of money, financing, maintenance costs of different vehicle types, etc... One point I don't see above: Consumer's Union (the nonprofit which publishes Consumer Reports) has a service where, for a small fee, they'll send you information about how much the car and each option cost the dealer, how much the dealer is getting back in incentive money from the manufacturer,  and some advice about which features are worthwhile, which aren't, and which you should purchase somewhere other than the dealer.  Armed with that info, you can discuss the price on an equal footing, negotiating the dealer's necessary profit rather than hiding it behind bogus pricing schemes. Last time I bought a new car, I got this data, walked into the dealer with it visible on my clipboard, offered them $500 over their cost, and basically had the purchase nailed down immediately.  It helped that I as willing to accept last year's model and a non-preferred color; that helped him clear inventory and encouraged him to accept the offer. ($500 for 10 minutes' work selling to me, or more after an hour of playing games with someone else plus waiting for that person to walk in the door  -- a good salesman will recognize that I'm offering them a good deal. These days I might need to adjust that fair-profit number up a bit; this was about 20 years ago on an $8000 car... but I'm sure CU's paperwork suggests a current starting number.) It isn't quite shelf pricing. But at least it means any haggling is based on near-equal knowledge, so it's much closer to being a fair game. The price inflation isn't a percentage, it's a fixed amount. If the dealer adds $R to the price of both the trade-in and the purchased car, then everyone ends up with the right amount of money in their pockets. So your formula should be: D + T + R = 0.1 * (P + R) "The system of comparison and calculation of insurance rates seems completely and utterly flawed to me. Why would you group cars from different manufacturers together by arbitrarily defined factors such as weight and size? It is perfectly possible to have a big, heavy car with very low claims, while a small car can have a lot more claims.   The response provided by Tesla seems similarly moronic. They claim that their car is being compared to the wrong types of car, but even if that were the case - *so what*? If the other cars you are being compared to are too cheap/slow/small, then you have obviously been assigned to the wrong group, and should be in another group with the bigger, more expensive cars, which I would gather are even more expensive to insure, and thus your car should be more expensive to insure.   If an insurance company is providing insurance to 1000 Volvo XC 90 drivers and 1000 Tesla Model S drivers and they get 100 claims from the Volvo drivers costing them a total of $ 200,000, while they get 150 claims from the Tesla drivers totaling $ 300,000 during the same time period, obviously the Tesla should be 50 % more expensive to insure. That is literally how car insurance works.   Here in Germany, every model of car is assigned a unique identifier (""Typschlüsselnummer"", roughly translates as ""type number"" or ""type identifier""). Insurance companies track which cars their clients own, and report condensed claims statistics for each model back to a central service provider, which then assigns an insurance group (Typklasse) to each car for each type of insurance (there are distinct, independent groups for liability, partial and comprehensive coverage) depending on the actual, measured per-car expenditures experienced by the insurance companies over the previous year. The insurance companies then feed that data back into their systems for their rate calculations." "Taking the last case first, this works out exactly. (Note the Bank of England interest rate has nothing to do with the calculation.) The standard loan formula for an ordinary annuity can be used (as described by BobbyScon), but the periodic interest rate has to be calculated from an effective APR, not a nominal rate.  For details, see APR in the EU and UK, where the definition is only valid for effective APR, as shown below. 2003 BMW 325i £7477 TYPICAL APR 12.9% 60 monthly payments £167.05 How does this work? See the section Calculating the Present Value of an Ordinary Annuity.  The payment formula is derived from the sum of the payments, each discounted to present value. I.e. The example relates to the EU APR definition like so.  Next, the second case doesn't make much sense (unless there is a downpayment). 2004 HONDA CIVIC 1.6 i-VTEC SE 5 door Hatchback £6,999 £113.15 per month ""At APR 9.9% [as quoted in advert], 58 monthly payments"" 58 monthly payments at 9.9% only amount to £5248.75 which is £1750.25 less than the price of the car. Finally, the first case is approximate. 2005 TOYOTA COROLLA 1.4 VVTi 5 door hatchback £7195 From £38 per week ""16.1% APR typical, a 60 month payment, 260 weekly payments"" A weekly payment of £38 would imply an APR of 14.3%." as long as we still have consumer choice in America, it's a zero issue  I can buy a $500 car or a $250,000 car.  most other products are extremely diversified in price and quality to reflect their target markets' desires and purchasing powers In many (most?) cases, luxury cars are leased rather than purchased, so the payments on even an expensive car might not be as high as you'd expect. For simplicity, take a $100,000 car. If you were to buy that in cash or do a standard five-year auto loan, that would be incredibly expensive for all but the wealthiest of people. But a lease is different. When you lease a car, you are financing the car's depreciation over the lease term. So, let's suppose that you're signing up for a three-year lease. The car manufacturer will make an estimate of what that car will be worth when you bring it back in three years (this is called the residual value). If this number is $80,000, that means the lessee is only financing the $20,000 difference between the car's price and its residual value after three years - rather than the full $100,000 MSRP. At the end of the lease, he or she just turns the car back in. Luxury cars are actually especially amenable to leasing because they have excellent brand power - just because of the name on the hood, there are many people who would be happy to pay a lot for a three-year-old Mercedes or BMW. With a mid- or low-range car, the brand is not as powerful and used cars consequentially have a lower residual value (as a percentage of the MSRP) than luxury cars. So, don't look at an $80,000 luxury car and assume that the owner has paying for the entire $80,000. "Looking at your numbers, I would definitively consider selling the car, and use the public transportation instead. You could easily save $450 month, plus gas and maintenance. As you mentioned, public transportation will be only a fraction of this amount, so you might end up saving around $400 monthly. If you decide to keep the car, the amount that you will spent monthly is easily a payment for a brand-new car. What if, God forbid, for any kind of reason, you get a traffic ticket that can increase your insurance premium? What if the engine stops working, and you will need to spent thousands of dollars fixing the car? With this, and all of the other expenses pilled up, you might be unable to afford all this at some point. If you decide to sell the car, the money that you will save monthly can be put in a savings account (or in any other sort of ""safe"" investment instrument). In this way, if your situation changes where you need a car again, you will be able to easily afford a new car. Regarding your need to visit your friends on the suburbs every other weekend, I think you can just talk with them, and meet on places where public transportation is available, or ask them to pick you up in the nearest station to the suburbs.  In conclusion, based on what you said, I do not think the ""little"" convenience that you get in owning the car outweighs the big savings that you get monthly, if you decide to sell the car." I like Nathan's answer some, but am horribly curious as to why you have not made payments on a $3500 student loan?  If you are wealthy enough to afford a new car, this should be paid off next week.  IMHO. Above all else your financial goals should dictate if you buy a new car.  What are they for you?  If the goal is to build wealthy quickly then Nathan's advice may be to unfrugal for you.   If your goal is to impress people with the car you drive and accumulate very little real wealth then purchasing or leasing a car should be a top priority. So to answer your question correctly one must understand your goals.   For 2016, the average car payment is $479 per month.  If you invested that in a decent growth stock mutual fund in 40 years you'll have around 2.6 million.  However, you do need something to drive now.  If you can cut your car expense to $200 per month, and save the other $279 you will still end up with about 1.5 million in that same 40 years.   Personally I attempt to shoot for $200 ownership cost per car per month.  Its a bit difficult as I drive a lot.  Also I would not purchase a new car until my net worth exceeded 2 million.  At that point my investments could mitigate the steep depreciation costs of owning a new car. I don't understand the calculations in the comments by the OP. He says My monthly savings after mandatory expense is around USD 2000. This includes rent, expenses, emergency fund savings, and the monthly required payment of my auto loan.  (emphasis added) He has $2000 USD left over after monthly expenses (which includes rent, food, utilities etc, contribution towards emergency funds, and the required monthly payment on the auto loan). He claims that by applying the $2000 USD per month towards reducing the debt, it would take him 30-36 months to be debt-free.  But is it not the case that applying the $2000 to the student loan of $18K+ (while continuing to make the auto loan payments) will pay the student loan off in less than 10 months? If no payments are made on that $18K+ student loan, the accrued interest of about $2K in 10 months (this is (18.25*13.7%*)(10/12) for a total of $20K+). In actuality, with the loan being paid down, the interest will be much less. Once the student loan is paid off, the extra $2000 can go towards what is left of the $10K auto loan each month and  pay it off in another 4 or 5 months or so. So we are talking of 15 months max instead of 30-36 months. Of course, as Carlos Briebiescas points out, the car is more valuable as an asset than can be sold in case of job loss  creating  a need for cash etc, and so paying it off first might be better, but that is a different calculation. "I'm going to ignore your numbers to avoid spending the time to understand them.  I'm just going to go over the basic moving parts of trading an upside down car against another financed car because I think you're conflating price and value.  I'm also going to ignore taxes, and fees, and depreciation. The car has an acquisition cost (price) then it has a value.  You pay the price to obtain this thing, then in the future it is worth what someone else will pay you. When you finance a car you agree to your $10,000 price, then you call up Mr. Bank and agree to pay 10% per year for 5 years on that $10,000.  Mr. Banker wires over $10,000 and you drive home in your car.   Say in a year you want a different car.  This new car has a price of $20,000, and wouldn't you know it they'll even buy your current car from you.  They'll give you $7,000 to trade in your current car. Your current car has a value of $7,000.  You've made 12 payments of $188.71.  Of those payments about $460 was interest, you now owe about $8,195 to Mr. Banker. The new dealership needs to send payment to Mr. Banker to get the title for your current car.  They'll send the $7,000 they agreed to pay for your car.  Then they'll loan you the additional $1,195 ($8,195 owed on the car minus $7,000 trade in value).   Your loan on the new car will be for $21,195, $20,000 for the new car and $1,195 for the amount you still owed on the old car after the dealership paid you $7,000 for your old car. It doesn't matter what your down-payment was on the old car, it doesn't matter what your payment was before, it doesn't matter what you bought your old car for.  All that matters is how much you owe on it today and how much the buyer (the dealership) is willing to pay you for it. How much of this is ""loss"" is an extremely vague number to derive primarily because your utility of the car has a value.  But it could be argued that the $1,195 added on to your new car loan to pay for the old car is lost." You're looking at a used car, which is good, but I think you can still be much wiser with the type of car you're looking to purchase. Maybe I'm such a fuddy-duddy because I didn't own a car until I was 25, but let's break this down with a small comparison: If you drive 1,000 miles per month with gas at $4/gallon -- which is absurdly conservative, I think -- for five years, then you're looking at an extra $60/month for just gas, and probably twice the payment, compared with a perfectly reliable but more fuel-efficient car from the same year.  (Disclosure:  I own a 2004 Corolla and love it.  I got mine in 2007 for under $10k, and I paid cash.) $300/month or so is a good chunk of change, no?  I'd do even more, and pay that loan off (which will almost certainly be less than $500/month) faster by throwing $500/month at it.  You'll save hundreds of dollars in interest. Edit based on your additions: There's one thing that you don't see yet that I have.  It's only because you're in your early 20s and I'm pushing 40. It is far easier to sock money away when you're single and don't have a family to take care of. (I'm assuming you're not married yet and that you don't have kids.  Hopefully it's not a poor assumption.) I would be saving like crazy now if I were in your position.  You have a great job for fresh out of college.  My first job started ten years ago after grad school at the same salary you're making.  Man, it was so easy to save money back then.  Now that I'm married with a daughter, a lot of that cushion goes away.  I wouldn't trade it for the world, but that's the price of being head of household. If you have any intentions of not being a hermit for the rest of your life (and I hope you do) then you'd be wise to save as much as you can now. A lease payment is composed of an interest portion (borrowed money) and depreciation amount (purchase - residual). The Monthly payment is then Monthly Interest Cost + Monthly Depreciation Cost The Money Factor is used to estimate the amount of interest due in a single month of a lease so you can figure out the monthly payment. If you are borrowing $100,000 then over the entire loan of repayment from a balance of $100,000 to a balance of $0, the average amount you owed was $50,000 (1/2 of principal).   You are repaying this loan monthly (1/12 of a year) and percents are expressed as decimals (1/100). 6 * 1/2 (for principal) * 1/12 (for monthly) * 1/100 (to convert percentage from 6% to .06)  = 6 * 1/2400. 2400 is the product of 3 consecutive conversion (1/2 * 1/12 * 1/100) to convert from an interest rate to a money factor. 6/2400 = Money factor of 0.0025 which can be multiplied against the total amount being borrowed to know what the monthly interest would roughly equal. Some Money Factor info: https://www.alphaleasing.com/resources/articles/MoneyFactor.asp