Everyone knows cars are expensive. In addition to the cost of acquisition, there's maintenance, insurance, and the average gas cost per year. We all know that those costs add up, but few of us know exactly how much it really costs to own a car. Let's take a look.
Key Takeaways
- Buying a car can be expensive, but owning a car will still cost you even if you only buy a cheap clunker.
- Insurance, registration, and emissions tests are all fees that many states require drivers to get.
- In addition, there are ongoing and routine costs such as gasoline, replacement parts, and repairs.
Government Estimates
Prices for new and used vehicle prices went up in 2022 according to the U.S. Bureau of Labor Statistics, with inflation rates of 10.4% and 12.7%, respectively. In 2023, however, car prices started to come down. In January 2023, the average price of a new car was $49,468 and in December 2023 it was $48,759.
According to Consumer Expenditures by the U.S. Department of Labor's U.S. Bureau of Labor Statistics, in 2022 the average vehicle costs $11,450 per year to own and operate. The breakdown of the figure comes to $4,496 for purchasing the vehicle, $3,120 in gasoline and motor oil expenses, and $3,834 in other vehicle-related costs. Other sources put the cost in 2023 for a new car at $12,182 a year.
Statistics From the American Automobile Association
The American Automobile Association (AAA) also compiles statistics on the cost of driving and has been doing so since 1950. Its 2023 "Your Driving Costs" survey summarizes the cost of gasoline, maintenance, insurance, license and registration, loan finance charges, and depreciation across the five top-selling models in each of the nine vehicle categories.
| AAA Total Cost Per Year | |||
|---|---|---|---|
| 2023 Model | 10,000 Miles per Year | 15,000 Miles per Year | 20,000 Miles per Year |
| Small Sedan | $7,707 | $8,939 | $10,188 |
| Medium Sedan | $9,638 | $11,048 | $12,477 |
| Subcompact SUV | $8,351 | $9,718 | $11,104 |
| Compact SUV (FWD) | $8,623 | $10,066 | $11,533 |
| Medium SUV (4WD) | $10,239 | $11,971 | $13,733 |
According to AAA, in 2023, the average person spends $12,182 per year for the privilege of driving. These numbers also don't include the cost of parking.
If you don't drive much, leasing a vehicle may be right for you to help minimize overall costs. Weigh your options and shop around different dealerships to get the best quote and potentially be able to negotiate.
Minimize Your Costs
Regardless of how much you spend on your car each year, less is always better. Although eliminating all spending on transportation isn't practical or possible for most people, some steps can be taken to keep your costs low.
If you can get to your destination with public transportation, you should seriously consider its merits. Not only does somebody else do the driving, but taking public transportation can often reduce your monthly transportation expenditures by a significant amount. Buses, trains, subways,and vanpools can all provide relatively inexpensive alternatives to driving yourself to work, and you don't have to pay for their maintenance.
Carpools are another great option. Just because you own a cardoesn't mean you always need to drive it. Taking turns with a friend can save you money on the average gas cost per year and help avoid wear and tear on your vehicle.
If you work odd shifts or can't access public transportation, you might have no choice but to own and use your vehicle. If that's the case, think small. Driving a small sedan can cost 59.6 cents per mile versus 79.8 cents for a gas-guzzling SUV, which amounts to a 29% savings per year! It's also a good move for the environment and, since you have to breathe the air too, a good move for your health.
Similarly, don't pay for an eight-cylinder engine when four cylinders will work just fine. Unless you're hauling heavy loads on a routine basis, the extra cost of a bigger engine results in more money spent on gasoline.
Whatever you are driving, make a conscious effort to drive it less frequently. Walking or biking to local destinations is good for your health and good for your budget. When you do drive, consolidate your trips. Go to the shopping center, the bank, and the dry cleaner all in the same trip instead of making three separate trips.
What Goes Into the Cost of Owning a Car?
The cost of owning a car goes far beyond the price of the car. It also includes interest payments on the loan you take out for the car, gas costs, insurance costs, legal document fees, maintenance costs, and repair costs.
How Can You Reduce the Cost of Owning a Car?
To reduce the cost of owning a car you can start with the car itself. Buying smaller cars will allow you to save money on gas right away. From there, constantly check for the best insurance rates and make sure you're getting the best deal you can. You can also drive less if possible; this could include carpooling to work, doing errands in one go rather than multiple trips, and using public transport when possible. Additionally, if you are consistent with the maintenance of your car, it could save you big repair costs in the future.
Is It Cheaper Not to Own a Car?
Yes, it is cheaper not to own a car. You will save money on the cost of a car, interest if there would have been a loan involved, gas, insurance, and maintenance. That being said, it depends on the specific situation. If you need a car to get to work, it may be more convenient to own a car rather than take public transport if the public transport is not timely or easy.
The Bottom Line
Regardless of how you get from place to place, pay attention to how much you are spending. This includes ancillary costs, such as car insurance and regular maintenance. By keeping an eye on your expenses, you can keep more money in your pocket.
Article Sources
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Kelley Blue Book. “New-Vehicle Prices Down Record 2.4% Year Over Year in December 2023.”
U.S. Bureau of Labor Statistics. "Consumer Expenditures in 2022."
AAA Newsroom. "Annual New Car Ownership Costs Boil Over $12K."
U.S. Bureau of Labor Statistics. "Consumer Expenditures—2022," Page 7.
AAA. "Your Driving Costs," Pages 1 and 2.
AAA. "Your Driving Costs," Page 1.
