The allure of a new car smell is fading faster than ever as drivers struggle with the rising costs of car ownership. Not only is the average price of a new car approaching $50,000, but other considerations like auto insurance and vehicle maintenance are taking a significant toll on many Americans’ finances.
How much does it cost to own a car?
To answer the question of how much a car costs overall, a good place to start is with the actual purchase price of the car. According to Cox Automotive and Kelley Blue Book, the average transaction price for a new car in June 2024 was $48,401, while used car transactions averaged about $25,251 in July 2024. Used car prices are down about $1,700 from the same time last year, but the prices wholesalers are paying at auction are up slightly, suggesting used car prices may be on the rise in the near future. But list price is just the beginning. There are other costs to owning a car.
According to Bankrate’s Hidden Costs of Car Ownership study, Americans spend an average of $6,684 per year on hidden car expenses on top of lease or loan payments. The study looked at the annual costs of auto insurance, gas, taxes, maintenance and repair costs. When you add in the average monthly payments for new and used cars, Americans spend about $15,504 per year on expenses related to a new car and $12,960 on a used car.
Costs of owning a car
As mentioned above, the cost of buying and maintaining a car involves a lot more than just fuel. The following factors all play a role in determining the total cost:
insurance
As of August 2024, the average cost of full coverage auto insurance is $2,329 per year, but premiums may vary depending on where you live, the type of car you drive, your driving history, the insurance company you choose, and the type and level of coverage you purchase. Comparing quotes from different insurers and choosing the right amount of coverage for your needs can help you avoid unnecessary expenses. Talking to an insurance professional can help you maximize the value of your auto insurance coverage.
Purchase Price and Financing
According to data from Experian, the average monthly payment for a new car loan is $735, while drivers who take out a used car loan pay an average of $523 per month. Based on these figures, if you’re on a budget, you might be better off buying a quality used car to keep your loan costs down.
gas
According to AAA, the national average price of gasoline is $3.51 per gallon as of July 24, 2024. This brings the average price of gasoline for Americans to $1,837 per year, depending on other factors such as your choice of vehicle and the price per gallon of gas in your area.
Our report concludes that the number of miles driven per year can exceed the average price per gallon of gas in each state, which can result in more money spent at the pump. For example, drivers in Hawaii drive an average of 10,980 miles per year and pay $1,978 per year for gas. Meanwhile, drivers in Indiana drive more miles (average 20,560 miles per year) and pay an average of $2,913 per year for gas, despite the state’s lower gas price of $3.68 per gallon.
Car repair and maintenance
According to AAA, the average price of scheduled maintenance on a 2022 Toyota Camry was 9.83 cents per mile in 2023. Nationwide, drivers drive an average of 13,596 miles per year and pay $1,336 for vehicle repairs and maintenance. Your own costs will vary depending on your vehicle model, repair costs in your area, and the distance you drive. Tracking maintenance costs like oil changes, tire rotations, and windshield wiper replacements may help you better budget for these expenses.
tax
Car tax rates vary from state to state and even municipality to municipality. Some states, such as Alaska and Delaware, have no general tax on car purchases. Alaska has a Motor Vehicle Registration Tax (MVRT) and Delaware has a gross receipts tax on sellers of goods. Tax rates may vary depending on where you live and your vehicle, but the national average annual car tax is $1,182.
Other vehicle costs to consider
There are other factors that affect the cost of owning a vehicle, and while registration and depreciation may not seem like a big part of owning a vehicle, these costs can add up.
Registration
Registration fees vary from state to state. Some states charge a flat fee for all vehicles, while others base registration fees on the vehicle’s age, horsepower, or weight. In states like Oregon, car owners may pay as much as $316 in registration fees, while Alabama residents may pay only $23. Contact your state’s Department of Motor Vehicles to find out how much it costs to register a vehicle in your state.
Depreciation
Depreciation isn’t actually a “cost,” but it’s something to keep in mind because your car’s value decreases as soon as you drive it off the lot. Car depreciation varies widely depending on the make and model, year, location, mileage, and how well you take care of it. According to AAA, the average annual cost of depreciation for a midsize sedan driving 10,000 miles per year in 2023 was $4,538. Because new cars typically depreciate quickly, buying used cars and keeping them in good condition may help lower your car’s depreciation rate.
How to calculate the total cost of car ownership
To calculate the total cost of owning a car, start with the initial cost of the vehicle and add the amount of interest you will or have paid over the life of your car loan. Include the costs of insurance, fuel, registration and regular maintenance like oil changes and tire rotations. Determining the exact amount of depreciation is difficult because factors such as the mileage, age, condition and value of the car all play a role in determining the exact amount of depreciation. However, Kelley Blue Book values can help you come up with a ballpark figure. Adding all these factors together will give you a monthly and yearly estimate of the total cost of owning a car.
First-hand insight: Is the cost of owning a car worth it?
As the cost of car ownership rises, some drivers are starting to rethink how many cars are worth owning, or if they’re even worth owning at all. To get a first-hand perspective, Bankrate’s insurance editorial team turned to r/MoneyDiariesACTIVE, a Reddit forum for women who share money tips and stories. Some users shared tips for reducing the cost of car ownership, while others reported saving significant amounts of money by going car-free altogether.
Reddit User 1*
October 7, 2023
Gas prices are killing me
I live in a car-centric area, so not having a car is not possible. We paid off our car in 2018, and my husband maintains it, so it’s not too bad. However,
Gas prices are hovering under $7 where I live, and it’s crazy that it costs $60 to fill up my small car. Remote work has made this situation a lot easier. Before, my commute to work was 45 minutes in traffic and cost me $200-250 a month just on gas, but now I only spend $60 a month on gas.
If there is an option for public transport, take it. Public transport “exists” here, but it is unreliable.
Via Reddit Community
Reddit user 2*
October 7, 2023
1 car household
My family has been living out of our car for the past eight years. I work at a university, so finding a place where we could live out of our car has been easy, but it’s always meant being intentional about where we live.
My car expenses over the last 6 months totaled $4,300, making it my second highest expense item. A little over half of that was my car payment ($430 per month). I put a 50% down payment on a used, low-mileage Camry and opted for a 3-year loan. Insurance over that period was $700, gas was $419, and maintenance was $300.
Via Reddit Community
Reddit user 3*
October 7, 2023
Save $900 per month
Moving from a car-centric area to a city where it’s not necessary has saved my family a lot of money. Rent is also a lot cheaper. Not being car-based is pretty much the norm, and public transportation is good and cheap, so we don’t feel restricted in any way. And when you think about how much we’ve saved… I’d say about $900 a month between payments, insurance, and gas.
Via Reddit Community
*Quotes and citations contained on this page have been verified by our editorial team and are accurate as of the publication date. Linked content may contain views and opinions that do not reflect those of Bankrate.
How to save money on owning a car
Owning a car can be expensive, but owners can take steps to keep costs down, including:
- Find cheaper car insurance: Since insurance companies have different algorithms for calculating premiums, some may offer lower rates than others based on your personal assessment factors and coverage needs, so comparing quotes from multiple providers may help you save money on your premiums.
- Choose your car wisely: Depending on the make and model of the car you buy, you may be able to save money right away and in the future on insurance, repairs, and gas. When shopping for a new car, it’s a good idea to research local gas prices, customer reviews, average maintenance costs, and average insurance rates for different makes and models before deciding which car to buy.
- Refinancing your car loan: Some auto loans can be refinanced to a lower interest rate, so it’s wise to see if a lower rate is available, especially if the market has changed since you bought your car.
- Integrate your driving trip: Driving your car more generally requires more maintenance and costs more for gas. It’s also a good idea to combine errands into one trip, carpool with friends or neighbors, or explore public transportation options. Driving less could also lower your auto insurance costs, especially if you participate in a telematics program.
- Car Maintenance: When it comes to car repair costs, the best defense is a good offense. Regular maintenance can help prevent expensive repairs in the future. Catching problems early can keep repair costs down.
When is it time to replace your car?
Cars don’t last forever, so at some point you’ll need to replace them. Over time, the maintenance may get out of hand or the car may no longer fit your lifestyle. Here are some situations to consider when deciding if it’s time to replace your car:
