The costs beyond the price
Start with the purchase price, then add sales tax and fees, which vary by place, so use the numbers a dealer quotes you. If you borrow, add the interest. Then come the running costs: fuel, insurance, registration, maintenance and repairs.
The last cost is depreciation, the drop in the car's value while you own it. You do not write a check for it, but you feel it when you sell or trade the car. To measure it, subtract the amount you expect to get back from what you paid.
Two invented cars over five years
Car A is new with a price of $28,000. Car B is used with a price of $19,000. Assume example tax and fees of $1,900 and $1,300, a $3,000 down payment on each, and a 60-month loan at an example 7% rate. That means $26,900 financed for A and $17,300 for B. Payments are $532.65 and $342.56, so total interest is $5,059.13 for A and $3,253.64 for B.
Next, running costs for 12,000 miles a year. Car A gets 35 miles per gallon and Car B gets 28, with an example fuel price of $3.50 a gallon. Fuel is $1,200 a year for A and $1,500 for B, or $6,000 and $7,500 over five years. Insurance is invented at $1,800 a year for A and $1,500 for B. Maintenance over five years is $2,500 for A and $4,500 for B, since the older car needs more repairs. After five years, assume A is worth $14,000 and B $10,000.
Add the down payment, all loan payments, fuel, insurance and maintenance, then subtract the resale value. Car A comes to $38,459.13 and Car B to $33,053.64. Car B costs $5,405.49 less over five years, about $551 a month against $641 for A, even though it uses more fuel. Change any assumption and the gap can shift, which is why you should use your own figures.
Why a longer loan lowers the payment but raises the total
Stretching the term spreads the same balance across more payments, so each one is smaller. But interest is charged for more months. On the $17,300 loan at the example rate, 36 months is $534.17 a month with $1,930.26 in interest. At 60 months it is $342.56 and $3,253.64. At 72 months it is $294.95 and $3,936.24.
A long loan can also leave you owing more than the car is worth for longer. If you may sell early, that matters. Run the auto loan calculator at two or three terms and compare the total, not only the payment.
Make your own comparison
Get real numbers where you can. Fuel economy ratings and estimated annual fuel costs for most models are on FuelEconomy.gov. Ask your insurer for quotes on the exact cars. Check recent repair and reliability information for the models you like. For the loan, a consumer-protection guide from the CFPB explains how to compare financing offers. Insurance prices and tax rates vary widely by place and person, so never reuse another person's figures. If you drive very little or a lot, change the mileage to match.
Try the calculator
Run your own numbers in the free auto loan calculator. It works in your browser and nothing you enter is saved or sent.
Sources
Common questions
Is a new car always more expensive to own?
No. It often loses more value early, but it may need fewer repairs. Compare actual totals for the cars you are considering.
Does leasing change this?
Yes. A lease has different payments and fees, and you do not keep the car. Compare it separately on total cost.
What about electric or hybrid cars?
The same steps work. Use their energy costs in place of fuel, and check current incentives with official sources.
This guide is general information, not financial, tax or legal advice. Rates, fees and rules change, so confirm current terms with the lender, store or agency involved. All dollar figures are invented examples.