For most Americans, owning a car is an important part of modern life. Increasingly, however, it’s becoming a financial burden for many. The average purchase price for a new vehicle has risen to more than $45K; average auto insurance rates are over $2K per year; in some states, gas costs over $4 a gallon. But these are only three costs associated with purchasing and maintaining a car. To discover the true cost of owning and maintaining a car, Bankrate’s insurance editorial team closely looked at all the costs involved in car ownership — and how they’re changing in 2024.
How much does it cost to own a car?
A good place to start is with the actual vehicle cost to answer the question of how much a car costs altogether. According to Kelley Blue Book, the average cost of a used car in April 2024 was $25,540, while a new car could be bought for the average price of $48,334 as of January 2024. Even with those seemingly high rates, the average cost of a car has declined slightly since the end of the pandemic, when supply chain issues and inflation drove prices sky-high. But the sticker price is only the beginning — there are other costs involved in owning a vehicle.
In 2023, the latest year for which statistics are available, AAA estimated that the annual cost of car ownership was $12,182, up from an average of $10,728 the previous year. This aligns with the U.S. Bureau of Labor Statistics’ Consumer Price Index report. While the report showed an annual decrease in both new and used car prices from June 2023 to June 2024, motor vehicle maintenance and repair was up 6.0 percent, while the average cost of car insurance increased by nearly 20 percent over the same period.
Average monthly cost of owning a car
Based on AAA’s data, the average monthly cost of owning and operating a car is $1,015. The organization used six cost categories to determine their average: depreciation, finance costs, fuel, insurance, government taxes and fees, and maintenance, repair and tires. They based their numbers on vehicles that were driven for approximately 15,000 miles a year and assumed a five-year ownership period. Your own rate will likely differ from the average since it is based on factors unique to you, your car and your situation.
Learn more: How to buy a new car in a high-cost environment
Costs associated with car ownership
As noted above, the costs associated with purchasing and maintaining a car include far more than just fuel costs. All of the following factors play a role in determining what your total cost will be.
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The average cost of full coverage car insurance in August 2024 is $2,278 per year, although your premium may vary based on factors like your age, your credit tier, where you live, the type of vehicle you drive and your driving history. Comparing quotes from different carriers and choosing the appropriate amount of coverage for your needs may help you avoid unnecessary expenses. Speaking with an insurance expert may help you maximize the value of your car insurance coverage. -
Based on data from Experian, the average monthly loan payment for a new car is $735, while drivers paying on a used vehicle pay an average of $523 monthly. Most individuals — 80.24 percent, to be exact — choose to finance their vehicles, but this number is down from 2022, when 84 percent chose to finance. Based on these numbers, if you’re on a limited budget, you may be better off purchasing a good-quality used car to keep loan costs in check. -
The national average cost of gasoline sits at $3.492 per gallon as of July 31, 2024, according to AAA. Some states are still dealing with far higher prices, though. Hawaii drivers pay the most, with a current average of $4.65 per gallon. By contrast, gas prices tend to be lowest in the South and Midwest; drivers in Mississippi only pay $2.97 per gallon. Consider your commute and average weekly mileage when you factor in gas prices; the more you drive, the more you’ll pay at the pump. -
Registration fees vary from state to state. While some states charge a flat fee for all vehicles, others base the registration cost on the vehicle’s age, horsepower or weight. In states like Oregon, car owners might pay as much as $316 in registration fees for an electric vehicle. Meanwhile, Nebraska residents could pay as little as $15 (plus some incidental fees). You can find out how much registering a vehicle in your state will cost by contacting your state’s department of motor vehicles. -
The average price of routine maintenance for a medium sedan was 10.85 cents per mile in 2023, according to AAA. For a car driven 12,000 miles per year — about the national average — that’s an average of $1,302 per year or $108.50 per month. Your costs may vary based on your vehicle type, repair costs in your area and how much you drive. Tracking maintenance expenses like oil changes, tire rotations and windshield wiper replacements may help you better budget for these costs. Maintenance and fuel costs combined cost an average of 25 cents. -
Depreciation isn’t a bill you’ll pay, but it is something to keep in mind, as your car’s value will decrease as soon as you drive it off the lot. A car’s depreciation varies widely based on its make and model, age, location, mileage and how well it’s taken care of. In 2023, the average annual depreciation cost was $4,538, according to AAA. Typically, brand-new vehicles lose value quickly, so buying used and keeping the car in good shape may help lower your car’s depreciation rate.
How to calculate the total cost of car ownership
To calculate the total cost of car ownership, you can independently estimate the amount you pay for each of the abovementioned factors — insurance, loan payments, fuel, taxes and fees, maintenance and depreciation — and add up the results. Keeping receipts and detailed records of all financial transactions involving your car can help you estimate your ownership costs accurately.
Suppose you need help calculating some of these factors or need more documentation. In that case, you can also use an online calculator to develop a general estimate based on your vehicle’s factors. AAA offers an online calculator for Your Driving Costs, and Edmunds’ True Cost to Own (TCO) calculator is another handy tool. Keep in mind, however, that the calculations you receive will be based on averages, not on your own particular costs.
First-hand insights: Is the cost of car ownership worth it?
As car ownership costs rise, some drivers are reconsidering how many cars are worth owning — if any. To get first-hand perspectives, Bankrate’s insurance editorial team turned to r/MoneyDiariesACTIVE, a women-focused Reddit forum dedicated to sharing money tips and stories. Some users shared their tips for reducing the cost of car ownership, while others reported that going entirely car-free had saved them a significant amount of money.
Reddit User 1*
Oct. 7, 2023
Gas prices are the killer
I live in a very car-centric area so not owning a car is impossible. I paid my car off in 2018 and my husband does my maintenance for me, so it’s not too bad. HOWEVER —
Gas prices are hovering under $7 where I live and it’s bonkers that my small car takes $60 to fill up. Remote work has made this so much better for me. Previously, I was spending $200-$250/mo on gas alone to and from work (45 minute commute each way in traffic), now I’m only paying $60/mo on gas.
If I had an option for public transit, I’d take it. It does “exist” here but it’s unreliable.
via Reddit community
Reddit User 2*
Oct. 7, 2023
One-car household
We have been a one-car household for 8 years now. My work at a university makes it easier to find places to live where that’s possible, but we’ve always had to make intentional choices about our specific locations to make that work.
Over the last 6 months, car costs totaled $4300, our second-highest spending category. Just over half of that is our car payment ($430/month). We put 50% down on a low mileage used Camry and chose a 3-year loan. $700 for insurance, $419 for gas, and $300 for maintenance in that time period.
via Reddit community
Reddit User 3*
Oct. 7, 2023
$900/per month saved
Moving from a car-centric area to a city where we can be car-free has saved my family so much money. And our rent is actually a lot cheaper too. I don’t feel constricted at all in mobility because it’s very common to be car-free and transit is very good and cheap. If I had to think about how much it’s saved us… I think around $900/month, between payments, insurance, and gas.
via Reddit community
*The quotes and citations included on this page have been verified by our editorial team and are accurate as of the posting date. Outlinked content may contain views and opinions that do not reflect the views and opinions of Bankrate.
How to save on car ownership
Although the cost of car ownership can be steep, owners may be able to take steps to keep expenses in check:
- Shop for cheaper car insurance: Insurance companies have different algorithms for calculating insurance rates, so some may offer you cheaper rates than others based on your personal rating factors and coverage needs. Comparing quotes from multiple providers may help you save on your premium.
- Choose your vehicle wisely: The make and model of the vehicle you buy may help you save immediately with a lower price tag and down the road with lower insurance, repair and gas costs. You may want to consider your lifestyle, local gas prices, customer reviews, and average maintenance and insurance costs when considering a new vehicle.
- Refinance your car loan: Some car loans can be refinanced at a lower rate. It may be wise to check and see if there’s a lower rate available, especially if the market has changed since the vehicle was purchased.
- Consolidate driving trips: The more you drive your car, the more maintenance it will generally require and the more you will spend on gas. It may be a good idea to consolidate errands into one trip, carpool with friends and neighbors and research public transportation options. Driving less might also mean lower car insurance costs, especially if you participate in a telematics program.
- Maintain your car: When it comes to vehicle repair costs, the best defense is a good offense. Having routine maintenance done may help prevent higher repair costs down the road. Early detection of issues can often bring repair costs down.
When is it time to replace a car?
Vehicles don’t last forever, so you will need to replace yours at some point. Over time, maintenance can become unmanageable, or the car might no longer be a good fit for your lifestyle. Here are a few situations to consider when thinking about whether or not it’s time to replace a car.
Family or lifestyle changes
Families may grow with time, and your ideal vehicle may change as your family changes. For example, a larger vehicle may be needed to accommodate car seats. While larger cars have more room and the newer models include advanced safety features, they may get fewer miles per gallon of gas than a smaller vehicle, which could mean greater financial responsibility.
Job or lifestyle changes may also necessitate a car replacement. Getting a new job with a longer commute could mean it’s time to invest in a more reliable vehicle with better gas mileage. If you own a small car but fall in love with camping, you may need to buy an SUV or truck to accommodate your new lifestyle preferences.
Chronic maintenance issues
Once a car has been used for many years, it may require more frequent maintenance. If a vehicle is constantly being taken to the repair shop, it might be time for a new ride. You can do some math to see if the cost of maintaining your current vehicle outweighs the cost of getting a different one.
Although newer car models are typically less likely to break down, they come with a substantial upfront cost or car payment. Additionally, with advanced safety features and computer systems, average maintenance costs may be more expensive than with an older model.
Poor fuel efficiency
Alternative energy and new technology have dramatically increased the fuel efficiency of modern cars. Those looking for a car that won’t use a lot of gas (or any at all) can find plenty of hybrid and electric vehicles on the market, and they’re becoming more affordable every year.
Although fuel-efficient cars may cost more to buy and maintain, fuel costs could decrease or be eliminated. Plus, fuel-efficient vehicles may reduce your carbon footprint and potentially earn you a discount on your car insurance with some carriers.
Budget changes
If your budget has recently changed, your vehicle might not fit your new needs. For example, perhaps you’ve taken a lower-paying job and are struggling to afford your car payment. Or maybe it’s the opposite: you’re making more money and can finally afford your dream car.
Aligning your vehicle’s costs with your budget could give you greater financial peace of mind. However, offloading an older car with depreciated value may not get you the total amount to pay off your loan, which could mean your budget has to adjust to meet your new payment needs. On the other hand, if your budget has increased, selling an older vehicle could eliminate some maintenance costs while providing a more comfortable and efficient ride.
Drivers should note that states typically charge more to register a newer vehicle and may also charge extra for all-electric models. Additionally, insurers typically charge a higher monthly premium to insure newer or luxury vehicles, as the cost to repair or replace this vehicle in the case of a covered event will likely be higher.
Pros and cons of replacing your vehicle
There are pros and cons to replacing a vehicle, which may vary by driver. While getting a new car may be exciting, it may also include additional expenses. Reviewing this list and comparing the pros and cons of a new car in your own life may help you decide if it’s time to purchase a new vehicle.
Pros
- New cars are typically more fuel-efficient.
- A hybrid or electric model could reduce or eliminate fuel costs.
- A different vehicle could better meet your family’s lifestyle and transportation needs.
- Newer vehicles usually require less maintenance and fewer repairs.
- Budget changes could help you buy a more comfortable or efficient vehicle.
Cons
- Buying a new car will likely increase your out-of-pocket costs, even if it reduces maintenance costs.
- It may cost more to register and insure a newer vehicle.
- When maintenance is needed, advanced systems could make repairs more costly.
- Fuel-efficient cars can have higher upfront costs.
- You could incur hefty out-of-pocket costs for the down payment and extended warranty.
Frequently asked questions
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The cars with the lowest cost of ownership typically get good gas mileage, have low maintenance costs and are proven to be reliable, based on customer and industry reviews. By doing some research, you should be able to find a car with a low cost of ownership to meet your budgetary needs. You can also start by considering low-cost models like the Nissan Versa, Mitsubishi Mirage or Kia Forte, as suggested by AAA. -
Most insurance experts recommend shopping around to compare rates from various providers to get the best rate on a policy. It may be a good idea to research all the car insurance discounts and bundles offered by various insurance companies. Many providers give discounts for things as simple as setting up auto-pay on your policy. Typically, bundling multiple insurance policies, such as auto and home, with one carrier nets you the biggest savings opportunity. Maintaining a clean driving record may also help you save on your car insurance rate as your driving record factors into your rates and indicates how risky of a driver you may be. -
Several factors play a role in the cost of used and new cars. The lingering effects of the supply chain crunch that occurred during the 2020 pandemic have caused delays in manufacturing and contributed to a shortage of car parts. A global semiconductor shortage has limited the production of new cars and increased costs. Demand has surged in the used car market due to delayed purchases from 2020 and before. This increased demand and limited supply have led to higher prices for used vehicles. Rising prices for raw materials have also contributed to the overall increase in vehicle costs. -
Vehicle depreciation rates can vary based on factors such as make, model and market demand. On average, new cars depreciate around 20 percent in the first year, primarily due to the initial drop in value when driven off the lot. Over the next few years, annual depreciation typically ranges from 15-20 percent. After about five years, the cumulative depreciation tends to be more gradual. On average, a vehicle may lose about 50 percent or more of its value over the first five years. Keep in mind that these are general estimates, and actual depreciation can vary based on factors like mileage, the vehicle’s condition and market trends. Regular maintenance and care can also influence a vehicle’s resale value.
