Total cost of ownership is the total price to buy and operate an asset over the course of its useful lifetime. For a motor vehicle, this includes the purchase price, financing costs (if any), tax, title, license, and registration fees, insurance, routine maintenance, depreciation, fuel, and other associated costs. Total cost of ownership is estimated at the time of purchase or calculated at a vehicle’s retirement. The estimates, based on research and market conditions, can be helpful in making a financial decision between potential vehicle purchases.
Kelley Blue Book calculates a manageable KBB 5-Year Cost to Own index for new vehicles each year. This figure includes:
- Fuel – the cost to fill up, based on 15,000 miles per year
- Maintenance – what it costs to keep the car running well
- Insurance – the average in your state, including collision and liability
- Repairs – based on a no-deductible extended warranty
- Financing – since most people don’t have the cash on hand to buy the car outright
- State fees – items like sales tax, license, and registration
- Depreciation (Loss in Value) – the difference between what you paid and what it’s worth
