Owning a car in 2021 costs nearly $10,000 a year, according to AAA.
Driving is getting more expensive. This year, the average driver will spend $9,666 to own a car. That translates to $805.50 a month. The annual figure is $105 higher than 2020’s number, largely because cars are more expensive.
Americans are choosing more expensive cars
The average cost of the new vehicle studied is $32,903, nearly 5% more than last year. The change reflects a change in buying habits. AAA explains, “Models in the small sedan, medium sedan, medium SUV and hybrid categories averaged an increase in vehicle price of $3,064, led by hybrids as consumers opt for larger (hence more expensive) models in this category. Pickup trucks saw an increase of $4,684 (an average of 11%).”
The motoring club’s annual Your Driving Cost study reviews the cost of ownership for 45 car models. It includes the five bestselling vehicles of each of nine types. AAA then examines fuel, maintenance/repair/tire costs, insurance, license/registration/taxes, depreciation, and finance charges for each vehicle to find the average cost.
Depreciation costs most; EVs save on fuel and maintenance
Depreciation is the largest cost buyers face, accounting for 40% of the total.
Fuel costs an average of 10.72 cents a mile, though that expenditure varies widely based on the vehicle’s fuel efficiency. Electric vehicle owners pay an average of 3.66 cents a mile traveled, compared with 15.81 cents a mile for pickup truck owners.
Maintenance and repair costs work out to 9.55 cents a mile. EV owners again pay less, averaging 7.77 cents a mile in maintenance and repairs. Medium sedans, somewhat surprisingly, have the highest average maintenance and repair costs, at 10.43 cents per mile.
It’s not all bad news. The cost of financing a car is down slightly, thanks to a drop in the prime lending rate. The average interest rate in 2021 is 4.12%, 1.056 percentage points lower than in 2020.
Minivans dropped from study, subcompact SUVs added
Americans’ car buying habits have changed, necessitating a change in the study. AAA dropped two categories of car – large sedans and minivans – “both of which no longer offer enough new models to be tracked.” In their place are subcompact SUVs and midsize trucks for the first time.
Car shopping recommendations
The rising costs led AAA to make a few recommendations to its members. Among them, it cautions against signing up for longer-term loans, even though these are growing in popularity. Recent research from credit rating agency Experian
shows that auto loan terms are getting longer.
“Initially, a loan like this may be attractive to a buyer since it helps lower the monthly payment. However,” AAA warned, shoppers “should know that with long-term loans comes a period when the vehicle will hold less value than what is owed due to depreciation.”
They also recommend that shoppers consider buying a slightly used vehicle rather than a new one so that “the original owner has absorbed the majority of the depreciation cost, while the vehicle still has quite a few of the latest features and a manufacturer’s warranty.” Sales of certified preowned cars are growing even as overall used car sales have begun to slow.
Finally, AAA reminds consumers that a car purchase can be as many as three separate negotiations – one for the price of the new vehicle, another for the trade-in value, and possibly a third over financing cost. “Consumers should take their time and negotiate them individually,” the organization said.
This story originally ran on KBB.com.