What is the actual cost of owning a car?

When you take into account loan interest, depreciation, fuel, insurance, maintenance and fees, the cost of owning a car makes a big leap. For new vehicles driven 15,000 miles a year, average car ownership costs were $12,182 a year, or $1,015 a month , in 2023, according to AAA. $735. $523.

How much should I spend on a car if I make $100,000?

Starting with the 1/10th guideline, created and pushed by Financial Samurai, this guideline states: buy a car in cash that costs less than 1/10th your gross annual pay. If you make $50,000 you should buy a car in cash worth $5000. If you make $100,000, the car you buy should be worth no more than $10,000 .

What is the single greatest cost of owning a car?

Depreciation , a measure of how quickly a vehicle loses value, increased $45 to $3,334 per year, on average. While depreciation remains the single biggest cost of ownership, rates grew more slowly than last year – meaning vehicles held their value somewhat better.

What is a realistic budget for a car?

According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%. You can use a car loan calculator to calculate a monthly payment within your budget.

How much should I actually pay for a car?

It is generally recommended that you cap transportation expenses at 10% of your monthly income. Beyond the sales price, buyers should also budget for other expenses like repairs, registration, and insurance.

What are the benefits of living car free?

By choosing alternative modes of transportation such as biking, walking or taking public transit, you're doing your part to reduce carbon emissions, curb air pollution, conserve resources and reduce congestion on your city's roadways .

Do you really need a car?

Functioning without a vehicle isn't always feasible . But if you live in an area where you can get around via public transportation or on foot, and you don't really need a car to work or shop, then it could pay to unload your car and enjoy the savings.

How much money do you save by not having a car?

The American Public Transportation Association (APTA) just put out a report showing that the "average person" in 16 of 20 large US cities would save over $10,000 a year by using public transit instead of driving. Across all 20, the average was $10,181.

In what 3 states is it most expensive to own a car?

Car ownership costs vary significantly by state, with California, Nevada, Florida, New York, and Washington being the most expensive due to high costs of insurance, fuel, sales tax, and vehicle depreciation.

Is car ownership worth it?

36% say having a car enables them to travel to see family and friends more easily, 34% say they're now able to get to and from work, and 31% say they feel safer commuting.

What is the actual cost of making a car?

On average, the raw materials that physically go into the car are about 47%, and the direct labor to build the car is about 21% of the car's value. So in a sense, you could say that the physical cost to manufacture a $50,000 car is about $34,000 .

What is the biggest fixed cost of owning a car?

-The biggest fixed cost is likely to be the installment payments associated with the loan (or lease) used to acquire the car . Variable auto ownership costs are dependent on the: miles covered by the automobile.

The True Cost of Owning a Car (2024)

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.

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.