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Owning a car offers undeniable convenience and freedom, but it can be a significant financial commitment. Between upfront costs for insurance, gas and maintenance, the average cost of owning a car is $12,297 a year or about $1,025 a month.

For car shoppers, calculating the total cost of ownership empowers you to make smarter decisions. This includes budgeting for unexpected repairs with an emergency car fund. By understanding the full financial picture, you can choose the car that best fits your needs and wallet.

In this guide, we'll unpack the cost of car ownership, explore the key factors that influence it and show you how to calculate it for your vehicle.

Common Car Expenses

Below, we'll break down common expenses you'll deal with as a car owner and how they factor into the total cost of ownership.

Purchase or Lease

Average retail price: $38,883 for a new vehicle

The cost of purchasing or financing a vehicle can often be the most significant aspect of owning a car, though it may not apply if you pay upfront or purchase the vehicle outright. While the average MSRP for a new car is around $39,000 choosing a used car with a lower price tag is a viable option.

To reduce the potential retail price of a vehicle you're eyeing, opt for a more opportune time of the year, such as September through December, when dealers begin offering discounts on last year's models ahead of the holiday season.

Registration and Fees

Average cost: $815 per year

Percentage of total yearly ownership cost: 6.6 percent

Registration and licensing costs fluctuate by state. Certain states impose fees based on the vehicle's value, whereas others apply a flat fee. Registration fees may also vary depending on your vehicle's weight, resulting in higher expenses.

Contact your state's Department of Motor Vehicles to find out more information about registration and licensing fees. They can provide accurate details tailored to your location, ensuring you clearly understand the requirements in your area.

Insurance

Average cost: $1,715 per year

Percentage of total yearly ownership cost: 14 percent

Your insurance premium costs will vary depending on the state, but also by:

  • Type of vehicle
  • Insurance provider
  • Your driving record
  • Coverage type and levels

Comparing quotes across multiple insurance companies will give you a better sense of the type of coverage you need so you can eliminate unnecessary expenses that won't provide value.

Fuel

Average cost: 14.90 cents per mile

Percentage of total yearly ownership cost: 18.1 percent

The average gas price across the United States is currently around $3.20, but this can fluctuate depending on the time of year and location. You'll need to consider your driving habits, such as daily commutes and the amount of gas you use per week. However, gas expenses largely depend on the type of vehicle you own and its fuel efficiency.

Maintenance

Average cost: 10.13 cents per mile

Percentage of total yearly ownership cost: 12.4 percent

Your maintenance costs will depend on your car type and the labor rates at your auto repair shop for routine servicing.Factor in larger expenses like replacing the car battery or brake pads, which don't happen annually but should be budgeted for regardless of your vehicle's age.

You can use AAA's Repair Estimate calculator to determine the estimated costs of labor and parts at an AAA Approved Auto Repair Facility.

Depreciation

Average cost: $4,680 loss in value per year

Percentage of total yearly ownership cost: 38 percent

Depreciation refers to the decrease in the value of your vehicle over time. Typically, new cars depreciate by around 20 percent during the first year and about 60 percent of their purchase price within the first five years.The decrease in the value of your car over time can heavily impact the cost of owning a vehicle, especially if you don't plan to own it long-term.

While the actual depreciation of your vehicle will depend on various factors, these estimates provide a good starting point. A car's make and model can also significantly impact resale value. Well-known and favored vehicles tend to hold their value longer than those that are less established. Unlike factors such as maintenance or fuel efficiency, this cost factor is fairly out of your control.

Inflation

Inflation rates in the United States can significantly impact the overall cost of car ownership. From rising fuel prices to increasing maintenance costs, inflation also puts pressure on your car budget. When considering a new car purchase, it's crucial to factor in the initial price tag and the potential impact of inflation on your ongoing expenses.

How To Calculate the Total Cost of Ownership

It's time to grab your calculator and start calculating your individual cost of owning a vehicle. When considering the following factors, be sure to factor in additional variables like your location, potential hidden expenses and your own driving habits.

Here are some steps you can take to get a rough idea of how much it costs to own a car.

Registration and Licensing

Simply grab your annual motor vehicle registration renewal amount and add it to your ongoing calculation. Don't forget to include expenses for parking permits and car insurance payments as well.

Gas

If you know your average monthly spending on gas, you can multiply that figure by 12 to estimate your yearly fuel expense. If you typically use your credit card for gas purchases, you'll find these transactions in your bank statement.

If you don't have this information readily available, you can calculate an estimate using your car's fuel economy rating. Divide this rating by the average number of miles you drive monthly to find out how many gallons your car needs monthly. Then multiply this by the average price of gas your car requires.

Routine Maintenance

Use your owner's manual to estimate all of the number of maintenance servicing you need throughout the year for your car's make and model. You can also use AAA's most recent maintenance average, 9.83 cents per mile, to estimate the cost. If your car is older or has required extensive maintenance, be sure to account for that as well.

  • Check your owner's manual: It'll outline the recommended maintenance schedule specific to your car's make, model and year. This schedule details the services you'll need and how often.
  • Use a mileage-based estimate: AAA suggests a national average of 9.83 cents per mile for maintenance. This can be a handy rule of thumb, but remember, it's an average.
  • Factor in your car's age and condition: As your car ages, it might require more frequent or expensive maintenance. Consider any past repairs or known issues that could affect future maintenance needs.

You can also use the AAA Driving Costs calculator to estimate the cost of owning a car more than just your monthly payment.

How To Save on Vehicle Expenses

Although car expenses can quickly stack up, the strategies below can be used to keep these costs under control.

1. Buy a Used Car vs. New

Buying a new car from the dealership can come with a strikingly higher price tag, along with quicker depreciation in the first year. On the other hand, lightly used cars are available at significantly lower prices and typically experience slower depreciation.

When considering used cars, it's advisable to have them inspected by a professional mechanic before making a purchase. This ensures no underlying issues may require costly repairs.

2. Shop Around For Car Insurance

Comparing quotes from multiple insurance companies can help you discover cheaper rates based on your coverage needs. Shopping around may help you find an insurance premium that better suits your budget.

Additionally, consider increasing your deductible, which will lower your monthly payments. This means you'll have to pay more out-of-pocket when repairs are needed. However, keeping up with regular maintenance can prevent issues and potentially avoid needing to use your deductible at all.

3. Drive a Fuel-Efficient Car

Choosing a fuel-efficient car can help you save on fuel expenses, which can significantly affect ownership costs. Consider the following:

  • Consider purchasing an electric vehicle or hybrid. These cars can save you money on fuel costs,especially when considering electricity rates.
  • Cars with higher MPG (miles per gallon) will allow you to drive longer between fuel stops.
  • Trucks and SUVs tend to consume more fuel. Lighter, smaller cars are much more fuel-efficient, which is ideal for those who drive frequently and have longer commutes.

4. Complete Regular Maintenance

Sticking to regular maintenance prevents costly repairs and keeps your car running smoothly for years to come. By staying proactive with tasks such as oil changes, coolant fills and brake inspections, you can catch potential issues early on and address them before they escalate into more significant problems.

Make things easier by using a car maintenance checklist to plan ahead. This ensures you stay on top of maintenance.

5. Refinance Your Car Loan

If you're still paying off your auto loan, you may be able to refinance it at a lower rate. This will lower your monthly payment and save on interest. To qualify, you'll typically need a good credit score and may need to wait for a period, typically six to 12 months after purchase, before refinancing your vehicle.

Cost of Car Ownership FAQ

Below are frequently asked questions about the cost of owning a car/

What Is the Annual Cost of Ownership of a Car?

The average annual cost of car ownership is $12,297, or $1,025 per month. Keep in mind that factors such as insurance, fuel and maintenance also impact the total cost.

How Much Should I Spend on a Car If I Make $100,000?

There isn't a one-size-fits-all for how much to spend on a car. However, a good rule of thumb to consider is the 10 percent rule. Keep all car expenses under 10 percent of your total gross income. For a yearly salary of $100,000, this would be under $10,000 per year.This rule provides a starting point to ensure your car expenses don't strain your budget.

What Are the Operating Costs of Owning a Vehicle?

The operating costs of owning a vehicle vary depending on the type of car and how you drive it. Here are some key factors to consider:

  • Registration and taxes
  • Insurance
  • Maintenance and repairs
  • Gas

Remember to factor in potential costs like parking fees, tolls and car washes. Remember, the exact cost for each item will vary depending on your vehicle, driving habits and location.

Maximize Your Savings With AAA Auto

AAA Members can enjoy many perks and benefits with their membership, including finding the ideal Auto Repair Shop for their car's needs. With nearly 7,000 Approved Auto Repair facilities nationwide, you're sure to receive ongoing maintenance for your car that minimizes the cost of car ownership and keeps your vehicle on the road.

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