Become someone who knows the real cost before buying a car

In 5 min you'll know: how to calculate the total cost of a car including credit, insurance and depreciation

In Block 1, Lesson 8, you learnt that the repayment figure is misleading and that the TAEG (annual percentage rate of charge — total credit cost) is the number that matters. Apply that to the car. The advert says "€149 per month" and shows a new model. What it doesn't say: over 72 months, with a €3,000 deposit, mandatory insurance, arrangement fee and a disguised interest rate. The rule: calculate the total cost of the car (price + credit + insurance + depreciation) before signing any contract.

Before you continue: when comparing loans, which number should be your main criterion — the monthly payment or the TAEG?

(Answer in the next paragraph.)

A car is the worst financial investment most people make — because it isn't an investment. It's an asset that loses 15-25% of its value in the first year and keeps depreciating every year after that. If you buy a car for €20,000 on a 5-year finance plan, by the end of the contract the car is worth €8,000 and you've paid €24,000 (price + interest + fees). You don't own a €24,000 asset — you own an €8,000 asset and an expensive lesson.

Car finance comes in various disguises: direct bank loan, leasing, renting and "dealership finance". They all sell the monthly repayment; none shows you the TAEG at first contact. The TAEG on car finance in Portugal ranges from 5% to 12% depending on your profile, deposit and term. Longer terms (72 or 84 months) lower the repayment but increase the total cost — and there's a period where you owe more than the car is worth (negative equity). If you need to sell during that time or the car is written off, the loss is yours.

The full calculation: car price + total credit interest + fees + 5 years of insurance + annual vehicle tax + MOT + estimated maintenance — estimated resale value at the end of the term = real cost of having that car. For a €20,000 car financed over 6 years at a typical TAEG, that figure can exceed €30,000. Now compare with an alternative: an €8,000 car paid in cash that does the same journey. The €22,000 difference invested at 5% over 6 years grows to nearly €30,000. The car isn't just a cost — it's an opportunity cost.

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Notice: Mowei is a financial education and comparison platform. We are not financial advisors authorised by the Banco de Portugal. This lesson is general information, not personalised advice. For decisions about specific products, consult a financial intermediary registered at www.bportugal.pt.

Calculate the total cost of the car before you sign (2 min) →

Your promise: This month, before signing any finance deal, I will compare 3 offers by APR and calculate the total cost.