The True Cost of Car Affordability

A finance payment can hide the real cost

Start with the amortising payment where that finance structure applies, then add insurance, tax, fuel or charging, maintenance and other recurring costs. Keep balloon or residual-value finance outside a standard loan formula unless those cash flows are modelled explicitly.

Depreciation is an assumption, not a quote

A car can lose value without producing a monthly bill. Include depreciation when comparing total ownership economics, but show the annual rate or future-value assumption clearly. Vehicle, mileage, condition and market demand can make actual resale value very different.

Compare alternatives on the same distance

Fuel and EV charging comparisons should use the same annual distance. Convert litres-per-100-km or kWh-per-100-km consistently and include charging losses when relevant. A cost-per-mile view can then combine finance and ownership costs on one basis.

Separate monthly affordability from ownership economics

A vehicle can fit the monthly budget and still be expensive to own once depreciation, insurance, maintenance and energy are included. Keep the finance payment as a cash-flow item and depreciation as an economic-cost assumption so the two are not accidentally counted twice.

Recheck the model when usage changes

Mileage is one of the strongest inputs in fuel, charging and cost-per-mile comparisons. If the vehicle will be used for a different commute, work pattern or annual distance than the current car, update the distance before comparing technologies or finance structures. A low running-cost estimate based on unrealistic mileage can distort the whole decision.