Total Cost of Ownership (TCO) — The Real Price of a Car in 2025

When shopping for a new or used car, the sticker price is only part of the story. What truly matters is the Total Cost of Ownership (TCO) the complete cost of buying, maintaining, and operating a car over time. A car with a lower purchase price isn’t always cheaper to own. Depreciation, fuel, insurance, and maintenance can make a supposedly “affordable” car more expensive in the long run. TCO helps you see the real financial picture before you buy.

What Is Total Cost of Ownership (TCO)?

The Total Cost of Ownership represents the full financial impact of owning a vehicle — typically over five years.

It includes not just the upfront purchase cost but everything else you’ll spend during ownership:

  • Purchase price and taxes

  • Depreciation (value loss)

  • Loan interest

  • Insurance

  • Fuel or electricity

  • Maintenance and repairs

  • Registration and other fees

By comparing cars using TCO, buyers can avoid surprises and choose a vehicle that fits their long-term budget.

[Try a Free TCO Calculator Online]

 

Why TCO Matters More Than Sticker Price

Many car buyers focus only on monthly payments or purchase price, but these figures don’t tell the whole story.

Two cars with similar prices can have completely different ownership costs depending on:

  • Fuel economy

  • Insurance class

  • Resale value

  • Maintenance needs

Note: A Toyota Camry Hybrid might cost $3,000 more than a non-hybrid version upfront,
 but it can save over $2,500 in fuel and $1,000 in maintenance across five years — lowering its overall TCO.

 

Main Components of TCO

 

Acquisition Costs

This covers everything you pay to buy the car:

  • Sticker price or negotiated sale price

  • Dealer fees

  • Taxes

  • Financing costs (loan interest)

Note: Even 1% lower loan interest can save hundreds over the financing term.

Depreciation

The single largest hidden cost in car ownership.
 Most cars lose 15–25% of their value in the first year and 50–60% after five years.

Cars with strong resale values — like the Toyota RAV4, Honda Civic, and Tesla Model 3 — maintain a lower TCO because they retain value longer.

Segment

Average 5-Year Depreciation

Example

Compact Sedan

45%

Toyota Corolla

Mid-size SUV

50%

Hyundai Santa Fe

Luxury Sedan

60%

BMW 5 Series

[Check Resale Value Trends]

Operating Costs

These include all the daily running expenses:

  • Fuel or electricity

  • Insurance premiums

  • Tolls and parking

  • Tires and consumables

Fuel efficiency has the biggest impact. For instance, an EV might cost $0.04 per mile in electricity, compared to $0.13 per mile in gasoline for a similar-size SUV.

Maintenance and Repairs

Scheduled maintenance, wear-and-tear parts, and repairs accumulate quickly over time.

Vehicle Type

Average 5-Year Maintenance Cost

Electric

$2,500

Hybrid

$3,000

Gasoline

$4,500

Electric cars generally have fewer moving parts — no oil changes, spark plugs, or transmission servicing — which helps lower TCO.

[Compare Maintenance Costs by Model]

 Fees and Taxes

These vary by region but include:

  • Vehicle registration

  • License renewal

  • Road tax or emissions-based fees

  • Annual inspections

In some countries, EVs and hybrids qualify for tax exemptions or rebates, reducing total ownership cost.

 

How to Calculate TCO

A simplified TCO formula looks like this:

TCO = Purchase Price + (Depreciation) + (Fuel + Insurance + Maintenance + Fees)

To compare cars accurately:

  1. Choose your ownership period (usually 5 years).

  2. Estimate annual mileage (e.g., 12,000–15,000 miles).

  3. Add your insurance and tax rates.

  4. Use an online calculator for precise results (Edmunds, KBB, or AAA TCO tools).

Example Comparison: EV vs Gasoline SUV (5-Year TCO)

Category

2025 Hyundai IONIQ 6 (EV)

2025 Toyota RAV4 (Gasoline)

Purchase Price

$46,000

$33,000

Depreciation

$16,000

$18,500

Fuel / Energy

$2,500 (electricity)

$7,800 (gasoline)

Maintenance

$2,400

$4,200

Insurance

$6,500

$6,000

Taxes & Fees

$1,200

$1,200

5-Year TCO

$74,600

$70,700

Source: Edmunds & manufacturer data, 2025 projections.

Despite higher upfront cost, the EV narrows the TCO gap due to lower fuel and maintenance costs.

[Compare Electric vs Gas TCO]

How to Use TCO When Choosing a Car

  1. Compare Across Models:
     Two similarly priced cars may have very different long-term costs.

  2. Consider Your Driving Habits:

    • High-mileage drivers benefit from efficient hybrids or EVs.

    • Occasional drivers may prioritize depreciation and insurance costs.

  3. Include Financing Impact:
     Don’t overlook interest — longer loan terms can increase total paid amount.

  4. Account for Resale:
     If you plan to sell in 3–5 years, depreciation matters most.
     For long-term ownership, prioritize reliability and maintenance costs.

 

Hidden Factors That Affect TCO

  • Tire Replacement: Bigger wheels = more expensive tires.

  • Fuel Type: Premium gas engines increase ongoing costs.

  • Local Energy Rates: EV charging cost depends on your electricity provider.

  • Insurance Classification: Sports trims or turbo engines often raise premiums.

 

How to Reduce Your TCO

✅ Choose reliable brands: Toyota, Lexus, Hyundai, Kia, and Honda consistently rank low on 5-year ownership costs.
 ✅ Avoid unnecessary upgrades: Larger wheels and luxury interiors add cost but little resale value.
 ✅ Maintain regularly: Preventive service reduces long-term repairs.
 ✅ Shop insurance annually: Switching providers can save 10–20%.
 ✅ Drive efficiently: Gentle acceleration and regular tire checks improve MPG and tire life.

[Find Low-TCO Cars for 2025]

Understanding TCO by Car Type

Vehicle Type

Typical 5-Year TCO

Key Factors

Compact Sedan

$35,000–$45,000

Great fuel economy, low insurance

Midsize SUV

$50,000–$65,000

Higher fuel, better resale

Luxury Sedan

$70,000–$90,000

Expensive depreciation, higher service

Electric Car

$55,000–$75,000

Low fuel/maintenance, higher purchase

Pickup Truck

$60,000–$80,000

High depreciation, costly tires/fuel

When TCO Trumps Monthly Payment

Many buyers focus on “What’s my monthly?”, but that can be misleading. A low monthly payment on a long-term loan might actually mean you’re paying thousands more overall.

Always compare:

  • Loan duration

  • Interest rates

  • Total payment over time

Rule of thumb:
 A slightly higher monthly payment on a low-TCO vehicle often saves money in the long run.

 

Using Online TCO Calculators

Trusted sites that let you compare models side by side:

  • Edmunds True Cost to Own®

  • Kelley Blue Book 5-Year Cost to Own

  • AAA Driving Cost Calculator

  • Carwow Ownership Cost Tool (UK)

Simply input your vehicle choices, driving habits, and region to get a detailed cost breakdown.

[Use Edmunds TCO Calculator]

 

Final Verdict — Why TCO Is the Smart Buyer’s Metric

The car with the lowest sticker price isn’t always the cheapest to own.
 A realistic TCO analysis reveals how fuel, maintenance, depreciation, and resale value interact over time.

Choose a car with:

  • Strong resale value

  • Excellent reliability

  • Low fuel or charging cost

  • Affordable insurance class

This combination ensures the lowest total cost over your ownership period.

[Compare 5-Year Ownership Costs Now]
[Find Best Value Cars by TCO]

 

Key Takeaways

  • TCO = the real cost of car ownership.

  • Always factor depreciation, fuel, insurance, and maintenance.

  • EVs and hybrids often have higher upfront prices but lower TCO.

  • Comparing TCO over five years prevents costly surprises.

  • Reliable, efficient, mid-range models deliver the best balance of value and comfort.

Expert Advice:TCO turns car shopping from a short-term decision into a long-term financial plan. If you compare vehicles by ownership cost — not just sticker price — you’ll find the car that truly saves money while fitting your lifestyle.