What is the 'real' monthly cost of a car?
How can I find out what these 'additional' costs will be when looking to buy a car? If you know what model you're interested in buying you can try out Edmund's True Cost To Own calculator. This will estimate the depreciation, taxes and fees, financing costs, fuel costs, insurance premiums, maintenance, repairs, and any tax credits for owning a certain model for various periods of time. You can improve the accuracy be substituting your own calculations, like if you already have an insurance quote. Consumer Reports has a useful chart to demonstrate how much each of those additional costs will add up, percentage-wise. They also list the most and least expensive cars to own.
"The opposite of a cost is an investment. Buying a car is an expense, usually a sunk cost, whereas purchasing real-estate, e.g. productive farmland, is an investment. (Some investments are wasting assets, as the value decreases over time, but they are still investments with market value, not costs.) ""Sunk cost"" isn't a fallacy. It just means an expenditure that one cannot expect to recoup. The action item is, ""Don't throw good money after bad."" The opposite of a sunk cost is an investment." In a business environment, this phenomenon could be easily explained by 'operational leverage'. Operational leverage is the principle that increasing revenues by a small amount can have a disproportionately large impact on net income. Consider this example: you run a business that rents out a factory and produces goods to sell to consumers. The rent costs you $10k / month, and all of your other costs depend on how many goods you produce. Assume each good gives you $10 in profit, after factoring your variable costs. If you sell 1,000 units, you break-even, because your variable profit will pay for your rent. If you sell 1,100 units, you make $1,000 net profit. If you sell 1,200 units, you double your overall profit, making $2,000 for the month. Operational leverage is the principle that adding incremental revenue will have a greater impact than the revenue already received, because your fixed costs are already 'paid for'. Similarly in personal finance, consider these scenarios: You have $1,000 in monthly expenses, and make $1,000 - your monthly savings (and therefore your wealth) will be zero.  You have $1,000 in monthly expenses, and make $1,100 - your monthly savings will be $100 per month. You have $1,000 in monthly expenses, and make $1,200 - increasing your income by ~10% has allowed your monthly savings double, at $200 per month. You have $1,000 in monthly expenses, and make $2,000 - your monthly savings are 5 times higher, when your income only increased by ~80%. Now in the real world, when someone makes more money, they will increase their expenses. This is because spending money can increase one's quality of life. So the incline does not happen quite so quickly - as pointed out by @Pete & @quid, there comes a point where increased spending provides someone with less increase in quality of life - at that point, savings really would quickly ramp up as income increases incrementally. But assuming you live the same making $2,000 / month as $1,000 / month, you can save, every month, a full month's worth of living expenses. This doesn't even factor in the impact of earning investment income on those savings. As to why the wealth exceeds income at that specific point, I couldn't say, but what I've outlined above should show how it is quite reasonable that the data is as-reported. maybe everyone who has responded needs to look closer at the income base repayment plan for student loans. What this means is he payment does not even cover his interest rate so each month he makes his payment the loan grows, does not decrease. This is not a simple interest loan which is irritating because car dealerships do not even use a non-simple interest loan any longer. So, well your suggestions are well intended what is your suggestion now knowing that his monthly payments is not reducing his loan but actually his loan is growing exponentially each month. I also like the comment where the average student loan is $30,000, I would like to know in what state that is. That may work for a community college or a student who is reliant on parents to supplement their income so they can go to classes, however for someone who is working and going to school that person must opt out for night classes and online classes which definitely increases the cost of your classes. Right now the cost per credit hour is in the $550- 585 range. Look at the basic cost of the lease.  Option 1: keep the car for three years. Pay for repairs during that time then sell it for $7,000. Option 2: Sell the current car for $10,000. Lease a new car for three years. Assume no need for repairs during those three years. At the end of the three years return the car in return for $0. Cost of option 1 is $3000 plus repairs.  Cost of Option 2 is 36 months x monthly lease cost. The first $83 of the monthly lease cost is to cover the $3000 fixed cost of option 1. The rest of the monthly lease cost is to cover the cost of repairs. Also remember that some leases have a initial down payment due at signing, and penalties for condition, and excess mileage. The lease company may also require a higher level of insurance for the lease to cover their investment if you have an accident.  Plus If you fall in love with a different car two year from now, or your needs change you are locked in until the end of the lease period. "The actual increase in the cost of living for one month over the previous month cannot be calculated from the annualized increase in cost over the entire previous year. Consider the hypothetical case of a very stable economy, where prices stay constant for decades.  Nevertheless, the authorities issue monthly statements, reporting that the change in the cost of living, for the last month, year over year, is 0.00%.  Then they go back to sleep for another month. Then, something happens, say in August, 2001.  It causes a permanent large increase in the cost of many parts of the cost of living components. So, in September, the authorities announce that the cost of living for the end of August, 2001, compared to August a year ago, was up 10%. Great consternation results.  Politicians pontificate, unions agitate on behalf of their members, etc... The economy returns to its customary behavior, except for that one-time permanent increase from August, 2001.  So for the next eleven months, each month, the authorities compare the previous months prices to the prices from exactly a year ago, and announce that inflation, year over year, is still 10%.   Finally, we reach September, 2002.  The authorities look at prices for the end of August, 2002, and compare them to the prices from the end of August, 2001 (post ""event"").  Wonder of wonders, the inflation rate is back to 0.00%!!  Absolutely nothing happened in August 2002, yet the rate of inflation dropped from 10% to 0%." At first guess, people have less and less disposable cash/income for a down payment which subsequently results in longer loan duration. I thought I recall reading an article not too long ago where average auto loan term was 70 something months and average new car is $30k+. That’s a lot of $$$ for a country where median household income is $50k. With enough money in the emergency fund to get rid of the car and still have a cushion, I would definitely get rid of it, as the car is not needed. Your car is only going down in value, which makes the current setup even less desirable. In essence, you are paying over $300 a month for something that, every month, is worth less and less. Since you are paying over $300 a month and it will take about $3000 from your emergency fund to get rid of the car, if you start putting that $300+ back in the emergency fund, in a mere 10 months you will have replenished the emergency fund. Just to make this a little less vauge, I will base everything on the Mercedes Benz American Express (MB AMEX) card, which is the closest to a $100 annual fee I found on American Express's website. The benefits of a card with an annual fee generally are worth the cost if (and only if) you spend enough money on the card, and avoid paying interest to offset the benefit.  Using the MB AMEX card as a reference, it offers 5X points for Mercedes Benz purchases, 3X points at gas stations, 2X points at restaurants, and 1X points everywhere else.  Even if we only make purchases at the 1X rate, it only takes charging $10,000 to the card in a year in order to make up the difference.  Not too hard to do on a card someone uses as their main method of payment.  Every dollar spent at the higher rates only makes that easier. There are a number of other benefits as well.  After spending $5,000 on the card in a year, you receive a $500 gift card towards the purchase of a Mercedes Benz car.  For anyone on the market for a Mercedes Benz, the card pays for itself multiple times with just this benefit.