Buying a New Car? Prepare for Over $10K in Yearly Ownership Costs
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The annual cost of owning and operating a new car ballooned nearly 11% in the past year to $10,728 — or $894 per month — according to AAA's Your Driving Costs study.
That represents a considerable hike from 2021, when it cost an estimated $9,666, or $805 per month, to own a new car. Costs normally don’t rise that dramatically year over year: In 2021, annual new car ownership costs rose 5% over 2020’s figures, according to AAA.
The cost estimate in the 2022 study doesn't include the monthly principal payment for those who take out a loan, so drivers will want to make sure to budget for the full cost of car ownership when buying a new car.
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Why is it more expensive to own a new car?
Unsurprisingly, the AAA report cited fuel prices as the main culprit behind this year's sky-high rise. Gas prices climbed steadily for more than a year before peaking at an average of over $5 a gallon in June, and U.S. drivers are on track to spend up to $562 billion on gasoline this year — twice as much as they spent on gasoline in 2020. The growing price of gas is being fueled by overall inflation, as well as by supply-chain impacts from Russia’s invasion of Ukraine.
The costs of all goods and services in the U.S. is up 8.5% year over year, according to the Bureau of Labor Statistics, and gas prices rose a whopping 44% over the same period. National pump prices have eased to an average of $3.95 per gallon (regular unleaded), which is still considerably higher than the $3.18 a gallon in August 2021.
The AAA report, released Aug. 11, assumed an average fuel price of 17.99 cents per mile, or roughly $3.99 per gallon, based on a weighted average of gas prices in the first five months of 2022. Gas prices continued their climb after the report was conducted (and remain volatile), and AAA said in a press release that new car ownership costs for 2022 may end higher than the report estimates.
Additional factors affecting costs
Per-mile fuel prices vary widely by type of vehicle, of course, ranging from 12.51 cents per mile for a small sedan to 24.63 cents for a half-ton pickup. Where you live makes a difference, too, with current average prices ranging from a low of $3.46 a gallon in Texas to $5.37 a gallon in California.
AAA evaluated 45 top-selling midpriced vehicles across six categories. While insurance prices saw larger increases in 2022, other ownership costs rose more modestly:
Depreciation: $3,900 a year ($3,656 in 2021).
Finance: $712 a year ($658 in 2021).
Fuel: 17.99 cents per mile (10.72 cents per mile in 2021).
Insurance: $1,588 a year ($1,342 in 2021).
License, registration and taxes: $675 a year ($669 in 2021).
Maintenance, repair and tires: 9.68 cents per mile (9.55 cents per mile in 2021).
The average Manufacturer's Suggested Retail Price — or MSRP — of a new vehicle is $33,301 in 2022 versus $32,903 in 2021, according to AAA. The study assumed vehicles would be driven roughly 15,000 miles per year and be owned for five years.
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How can I save money on new car ownership costs?
Drivers who prefer a new car to a used car can consider switching to an electric vehicle or hybrid vehicle. It would cost approximately $600 per year to charge an electric vehicle, AAA estimates, compared with the $2,100 per year to fill up a gas tank. Of course, electric vehicles can often be expensive, so make sure the fuel savings aren't canceled out by the overall cost of the car.
You can also download a gas app, such as GasBuddy or Upside, to help you find the most affordable gas in your area.
On an overall basis, a small gas-powered sedan has the cheapest ownership costs at 54.56 cents per mile, compared with 60.32 cents for an electric car and 64.61 cents for a hybrid, according to the AAA study. A half-ton pickup tops the list at 86.21 cents per mile.
You can check for cheaper insurance rates, too. A NerdWallet survey from 2017 found that roughly 43% of insured drivers hadn’t shopped for new insurance in at least a year, even though shopping for better deals could’ve yielded savings as high as $400 per year.
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