For most Americans, owning a vehicle is a necessity. Without your trusted four-wheeler, navigating your daily life and various obligations seems almost impossible. But, are you aware of what the average cost of owning a car is and all of the aspects that make up this total cost?
Of course, the total expenses include much more than a simple loan payment for your chosen vehicle. There are several aspects to take into account – the price of fuel or charging batteries, the cost of maintaining your vehicle, as well as numerous fees such as registration and insurance.
The Annual Cost of Owning a Car Increased Significantly Over the Last Year
According to the American Automobile Association’s (AAA) Your Driving Costs study, the annual cost of car ownership crossed the $10,000 mark in 2022. For new vehicles driven 15,000 miles a year, the average expense is now $10,728 – or $894 a month, and that’s a substantial increase from 2021’s yearly total of $9,666.
The Cost of Buying a Vehicle Has Also Gone Up
If you’ve recently researched buying a car online, you’ve probably wondered – why are car prices so high? Due to inflation and supply chain issues, the cost of buying a new or used vehicle has also increased substantially this year. According to the most recent data from the automotive research company Kelley Blue Book, as of June 2022, the average cost of a used car is $28,200, and for a new car, it’s $48,301.
Monthly loan payments for brand-new vehicles are now an average of $700, while buying a used car averages $525 per month. So, regardless of your choice, you will still likely be paying over $500 a month if you’re buying a vehicle at this moment. The most cost-effective option in that regard would be to get a used vehicle that is in good condition – it will reduce your monthly payments and also potentially save you money for maintenance in the long run.
The Yearly Operating and Ownership Expenses Are Dependent on the Type of Vehicle You Have
First things first, you should know that expenses when it comes to vehicles are split into two categories. There are operating costs or simply things that keep your car running, such as fuel and maintenance. And then there are ownership costs which are all of the expenses you need to take care of in order to be a legitimate owner of a vehicle. Insurance, registration, license, taxes, depreciation – all of this adds up to your total cost.
Here’s an overview of the operating and ownership yearly expenses according to what type of vehicle you have or are looking to purchase.
|Operating cost||Ownership cost||Total per year|
|½ Ton/Crew-Cab Pickup||$5,094||$7,838||$12,932|
Sometimes Replacing a Vehicle Can Be Cost-Effective in the Long Run
In some cases, the most cost-effective option would be to simply replace your vehicle. Here are a few reasons why this might be the best option for you.
There Were Significant Lifestyle Changes
Maybe your family has grown over time, and you need a larger vehicle for a family that requires additional car seats or a baby-friendly car. Maybe you’ve just moved to a new city, and your trusted car, perfect for off-road driving, just doesn’t fit into your lifestyle anymore. Whatever the reason, if you see that your old vehicle is just not the right fit anymore, there’s definitely a car that could meet your daily transportation needs better.
There Are Continued Maintenance Issues
Unfortunately, your vehicle doesn’t last forever, and sooner or later, you will have to replace it. Sure, you can change a tail light if it gets damaged or replace U-joints if they’re not working properly. But, after a while, the maintenance can become unmanageable and it’s a better option to simply replace the whole vehicle and have fewer maintenance costs for the first few years.
There Was a Change in Your Budget
Maybe there was a change in not only your lifestyle but your budget as well. If you’re struggling to afford your monthly payments, or you can now finally afford that expensive classic car you’ve always wanted. While I’m hoping it’s the latter one for you, if there’s a significant change in your budget, there should be a change in what you’re driving as well.
Calculating the Total Cost of Owning Your Vehicle Is the Crucial Part of Making a Budget Plan
Living without your trusted four-wheeler is difficult to navigate through – you will always be dependent on public transportation or friends’ help. Going through your daily life and taking care of various obligations seems almost impossible, but owning a car that you simply can’t afford is definitely impossible.
That’s why it’s important to calculate the total costs of the vehicle you’ve got right now or you might buy soon. It’s one of the biggest living expenses, and planning it according to your budget is crucial. Here’s everything you should know about various aspects of these expenses and some helpful tips for lowering each of them.
Fuel Is One of the Most Fluctuating Expenses of Having a Vehicle
Gas prices are changing almost daily, so fuel is one of the most variable aspects when it comes to the expenses of your vehicle. According to AAA, the average car owner paid around 18 cents a mile for regular gas in early 2022 – for a 15,000-mile year, that’s $2,700 just for fuel. It might not seem like much when you’re taking occasional trips to the gas station, but there’s no way you can overlook an expense of a few thousand dollars each year.
The national average peaked in mid-June 2022 at just over $5.00 per gallon, but the good news is that the prices are lower now. As of October 2022, the national average for gas is $3.83 per gallon, but in some states, such as California, the average is still much higher. So, search for the average of your state, and estimate your weekly mileage to figure out how much you’re paying for it annually.
Getting a Fuel-Efficient Alternative Is a Good Way to Lower the Gas Expenses
Hybrid and electric vehicles are becoming more affordable each year, and they are a great fuel-efficient alternative because they don’t use a lot of gas, or for that matter any at all. They can be expensive to buy and maintain, but if you’re looking for an option to decrease or completely get rid of your fuel costs, it’s a good option. There’s also the aspect of having a smaller emissions footprint which makes it beneficial for the environment.
A gas-powered car owner will spend an average of 18.4 cents per mile for gas, but for an electric car, it’s only about 4 cents per mile. If both of these cars have a 15,000-mile year, it’s $2,700 for filling up the tank and $600 for charging the battery – a whopping $2,100 difference. Of course, there are other expenses that add up to the total cost, but it’s good to keep in mind if you’re thinking about replacing your car.
You Can Find a Vehicle With Better Gas Mileage or Figure Out Ways to Drive Less
If you’re not interested in buying a hybrid or electric car, but you’d like to lower your total fuel costs, you can look at options that have good gas mileage. For example, sedans generally have better gas mileage than bigger vehicles like trucks and SUVs. So, if a smaller car can fit your lifestyle needs, replacing it with your current vehicle could be a good way to lower your fuel expenses.
Also, simply being mindful can save you a lot of money in the long run. You can try to organize your daily chores so that you don’t have to take multiple trips to do everything. Or, you can sometimes carpool with friends and family and maybe even use public transportation from time to time. Being mindful of how much you’re driving will not only help with fuel expenses but the cost of maintenance as well.
Getting Regular Checkups Can Lower Your Maintenance Costs in the Long Run
According to AAA, routine maintenance averages $9.68 per mile in 2022, so the annual average cost of vehicle repairs is $1,425. Common maintenance includes oil changes and tire replacement, which are usually done at 5,000-mile intervals or about three times a year. The total cost of maintaining your vehicle will simply depend on the amount of time you spend driving, so being mindful of your mileage can reduce the general wear and tear.
You will probably have to pay for these common maintenance jobs yourself, but if you’re still under the factory warranty, you won’t have to pay for certain repair costs. If your car isn’t under warranty, it’s a good idea to have routine maintenance check-ups because certain issues can be detected early and save you the stress of getting an unexpected bill for repairs.
The Costs of Registration, Licensing, and Taxes Vary From State to State
The average vehicle owner will pay $675 for licensing, registration, and taxes in 2022, according to AAA. You’re required by law to have your vehicle registered with your state’s Department of Motor Vehicles (DMV), so it’s obviously something you can’t skip. Here are a few common situations where you need to register your car:
- When you buy a new car,
- When you have to renew your registration,
- When you move to a new state.
The total amount of licensing fees comes down to the state you’re registering in. You can check the vehicle registration fees for your state on the website of the National Conference of State Legislatures. While some states charge the same fee for all vehicles, others base the cost on the weight, age, or horsepower of your vehicle.
The Total Cost of Insurance Fees Depends on Numerous Factors
Almost every state requires proof of auto insurance to register a vehicle. According to AAA, the average annual full-coverage insurance is about $1,588, but it might be more or less depending on several factors. The selected coverage, the type of car, your age and your driving history, as well as your location – each of these factors contribute to the final price of the insurance fees.
That’s why it’s important to compare quotes from various providers when you’re choosing insurance coverage. Keep in mind that if you opt for multiple insurance policies, such as home and auto, you might be able to have a discount. Also, if you have a newer or luxury vehicle, be prepared to pay a higher monthly premium because the cost of potential repair or replacement of this vehicle will obviously be higher.
Depreciation May Not Be Something You Pay Out of Your Pocket, But It Affects the Total Expense of Ownership
The last thing you should keep in mind is not actually a cost, but it’s important because the total cost of your ownership is dependent on it. New cars depreciate much faster, simply because they’re no longer new as soon as you drive them off the dealership parking lot. But all cars depreciate over time, which means you lose money. You can’t fight against time, but you can keep your car in good condition, and that
For Most of These Categories, Simply Keeping Your Car in Good Condition Is Beneficial
When it comes to fees you have to pay, such as insurance or registration, choosing the right policy, or simply being lucky enough to live in a state with low registration costs is all you can do. But, for other aspects, such as gas or maintenance expenses, or the overall depreciation rate, you can do so much just by keeping your vehicle in good shape. So, be mindful and take care of your car, and it will surely help you in the long run. After all, it’s one of your most prized possessions.