The Cost of Owning a Car: A Transparent Ten-Year Budget
Build a complete ownership budget with purchase price, finance interest, running expenses and disposal proceeds, without counting loan principal twice.
The showroom price and monthly instalment answer different questions. To understand a car’s cost, prepare both a cash-flow plan and an ownership-cost calculation. This guide uses one explicit scenario so the arithmetic can be checked.
The assumptions
Assume a final on-road price of $180,000, a $108,000 loan over seven years at 2.8% annual flat interest, and ten years of ownership. These are hypothetical inputs, not a quotation for a named model or a claim about current lender rates.
Assume running costs average $800 per month over the period. This is a planning allowance to replace with your own insurance, road tax, energy, parking, ERP and repair estimates. Holding it constant is a simplification; actual costs and use can change.
The cash needed
The deposit is $72,000. Interest is $108,000 × 2.8% × 7 = $21,168. Total repayments are $129,168, or about $1,537.71 per month. During the loan years, repayments plus the assumed running costs total about $2,337.71 per month.
After the loan ends, the repayment stops. That does not mean ownership becomes free: running costs continue and the car still loses remaining entitlement. The initial deposit also remains part of the overall cash committed.
The ten-year economic cost
| Component | Amount |
|---|---|
| Final purchase price | $180,000 |
| Finance interest | $21,168 |
| Running costs: $800 × 120 | $96,000 |
| Gross outlay | $297,168 |
| Assumed disposal proceeds | −$3,000 |
| Net ownership cost | $294,168 |
| Average over 120 months | $2,451.40 |
The $3,000 disposal amount is an assumption. For example, $2,000 could represent 5% of $40,000 actual ARF for an eligible newest-cohort car at the applicable final age band, with a separately assumed $1,000 body value. Use the exact vehicle record and disposal date in a real decision; an older cohort can produce a different result.
Do not add the $72,000 deposit and $108,000 loan principal to this table again. They already finance the $180,000 purchase price. If using depreciation instead, purchase price minus disposal value replaces those two rows; it is not another cost to add.
Replace the running-cost allowance
- Insurance: obtain a quote for the actual drivers, cover and use.
- Road tax: use the registered capacity or power, powertrain, age and scheme.
- Energy: annual distance multiplied by consumption and the actual fuel or charging price.
- Parking and ERP: use your home, destination and route rather than a national “average”.
- Servicing and repairs: separate scheduled work, wear items, major repairs and downtime.
Reserve for uneven bills. A monthly average can look manageable while a large repair, annual insurance payment or tyre replacement still creates a cash shortage.
Test the uncertain inputs
If running expenses average $100 more a month, ten-year cost rises by $12,000. If eventual disposal proceeds are $5,000 lower than an alternative optimistic assumption, ownership cost rises by the same $5,000. These changes can exceed a small saving in the next COE exercise.
An EV comparison should separately change energy, road tax, insurance, maintenance and purchase assumptions. Do not subtract VES or EEAI again from a final price that already includes the adjustment.
Use the result to decide
Compare the budget with your household’s available cash and a realistic transport alternative. The ten-year average is an economic comparison, not the required monthly loan payment. The total-cost calculator and loan calculator help keep the two views separate.
Sources and review date
Reviewed on 13 September 2026. Historical results retain their exercise dates; worked budgets are assumptions, not quotations.