For the majority of Americans, a car is a necessity. Unless you reside in a region with a robust public transit system, your car probably helps you get around in daily life. Do you realize how much your automobile truly costs you in this era of historically high inflation? In order to better help you understand how your vehicle affects your bottom line, Bankrate digs into the true cost of car ownership.
What is the typical cost of car ownership?
Due to supply chain concerns and inflation, buying a new or used car has become much more expensive. According to Kelley Blue Book, the average price of a used automobile was $28,012 and the average price of a new car was $48,043 in June 2022. These costs are enough to make many people shudder, but they are merely the beginning in a lengthy list of costs associated with car ownership.
In addition to other expenses, owning a car has fees for gas, insurance, maintenance, and more. A study by AAA estimates that in 2021, in addition to the vehicle’s purchase price, the total cost of owning a new vehicle will be $9,666. But keep in mind that in 2021 there hadn’t been the soaring inflation that has engulfed the country in 2022. All transportation expenditures (apart from gas) are expected to rise by 9.5 percent between June 2021 and June 2022, according to the Bureau of Labor Statistics (BLS). The price of owning a car will probably be much greater in 2022 than it was in 2021.
Costs associated with car ownership
There may be solutions to reduce some car ownership costs that are more obvious than others. Here are some things to think about if you’re buying your first automobile or just want a reminder of what car ownership involves.
In spite of the fact that the average cost of full coverage auto insurance in 2022 is $1,771 annually, your premium will change depending on the kind of car you drive, your driving record, the insurer you select, and the kinds and levels of coverage you buy. Driving safely can protect you from surcharges, which can significantly reduce the cost of your auto insurance. It’s crucial to choose the appropriate level of coverage for you. You can get the most out of your auto insurance coverage by speaking with an insurance specialist.
According to Experian, monthly loan payments for new car loans increased to an average of $677, while those for used car loans averaged $515. It should come as no surprise that these sums have increased to reflect inflation. Your auto loan payment and upcoming maintenance costs may be lower if you choose to purchase a used car in good condition.
Recently, there has been constant coverage on gas costs, and for good cause. According to the auto club AAA, the national average is at $4.30 per gallon as of July 27 after reaching a peak of just over $5.00 per gallon in mid-June. However, several states continue to see far higher pricing. Drivers in California pay the most, with an average gallon price of $5.69, down from a peak of $6.44 in mid-June. When considering gas prices, keep in mind that the more you drive, the more you’ll pay at the pump.
States have different registration costs. The National Conference of State Legislatures has information on automobile registration costs for each state.
According to AAA, the cost of routine maintenance, repairs, and tires was 9.55 cents per mile in 2021. The average cost of auto repairs in the United States is $1,425. It is likely to cost more to maintain and repair your vehicle now than it did a year ago because the BLS recorded a 7.9 percent increase in overall vehicle maintenance costs between June 2021 and June 2022. Driving less may lower these costs by minimizing wear and tear since the cost of maintaining a car is closely correlated with the quantity of time spent on the road.
Although depreciation isn’t technically a “cost,” it is important to be aware of because it will lower the value of your car as soon as you drive it off the lot. The depreciation of a car varies greatly. According to AAA, the average yearly cost of depreciation in 2021 will be $3,900. New cars depreciate quickly, so buying a secondhand car and keeping it in good condition could help you reduce the rate of depreciation.
How to save on car ownership
Despite the high cost of car ownership, owners can take measures to reduce costs:
- Shopping around for less expensive auto insurance may be a wise choice because some insurance providers are known for providing lower rates than others.
- Your auto loan may be refinanced at a lower interest rate in some cases. Whether the market has changed after the vehicle was acquired, it would be a good idea to check to see if a lower rate is available. It could be a good idea to take this action now because of the sharp rise in interest rates.
- Consolidate your driving trips: Your car will typically need more maintenance the more you drive it. Consolidating your errands into one trip, carpooling with friends and neighbors, and looking into alternate local public transit choices may all be smart moves. Reduced auto insurance costs may also result from decreased driving, particularly if you take part in a telematics program.
- Maintain your car: The best defense against expensive auto repairs is a good offense. Regular maintenance can potentially assist avoid future greater repair expenses. Often, if problems are discovered quickly, repair expenses might be reduced.