Hart, 29, joined the Serie A club on a season-long loan in August after being told he was free to leave City by manager Pep Guardiola.
The England goalkeeper has said he is "surplus to requirements" at City.
"Hart wants to stay at Torino but we are all aware, both him and the club, we can't buy him," Mihajlovic said.
The Serb told Gazzetta dello Sport: "At the most we could take him on loan for another year but that depends on both Manchester City and him.
"We will need to know if Hart is going to be here next year because if he's not then we'll need to change the way we play."
In March, Hart told the BBC's Premier League Show that he does not see himself playing for City again, adding that a return to the Premier League was not top of his wish list.
Hart, who has played for England 70 times, has had "no communication with anyone" about a transfer after his loan spell at Torino ends in May.
Speaking on Thursday, Guardiola refused to discuss if Hart could have his loan spell extended in Turin.
"At the end of the season we are going to speak about the players who are under contract next year and about the loan players," he said.
Hart's 33-year-old replacement, Claudio Bravo, has been criticised by fans for his performances since his £15.4m arrival from Barcelona in August.  Willy Caballero, 35, has featured in the squad for Premier League and Champions League matches since 21 January.
But Bravo was restored to the starting line-up for City's win against Hull last weekend. City play Southampton at 17:30 BST on Saturday.
"Every weekend I will decide who is in goal, " added the Catalan manager. "Last week I decided on Claudio.
"It depends on if the opponent makes a lot of high pressing or not and what I see in the training session. I have confidence with both. We will see."
Torino cannot afford to sign Manchester City goalkeeper Joe Hart on a permanent deal despite wanting to, says head coach Sinisa Mihajlovic.