TCO Model
How we calculate total cost of ownership across fuel, maintenance, insurance, incentives, and depreciation.
Total Cost of Ownership Model
For each vehicle, we compute the total cost of ownership as:
Yearly fuel cost is your annual miles divided by the vehicle's efficiency, times the price of the fuel, the same arithmetic as the EPA fuel economy label. Efficiency comes from the EPA ratings (fueleconomy.gov) for the three newest model years in the file; electricity and gasoline prices are the U.S. Energy Information Administration's figures for your state. The costs are summed in nominal dollars with no discounting, which is the zero-discount case of the life-cycle cost formula in NIST Handbook 135 (Equation 5-1).
Prices grow year to year at the ten-year rates of the BLS consumer price indexes for gasoline, electricity and all items, carried forward. Maintenance per mile comes from the AAA Your Driving Costs study (medium sedan, electric and gas), scaled to your miles. Depreciation is our own estimate: no free source for resale values exists, so it is labeled as an estimate and you can override it.
Purchase price and insurance are yours to enter. When you leave one out, the results page uses an example value and lists it under the headline, so you can see what was assumed.