The cost of owning a car

Car ownership is as American as apple pie. Last year more than 17 million vehicles were sold in the U.S. for the fifth year running. But the privilege of owning a car comes with a price tag.

When it comes to the costs associated with being a car owner, many people think about gas prices and car loan payments, but there are additional costs to consider.

What is the average cost of owning a car?

Regardless of the vehicle, car owners can expect to pay thousands of dollars each year. According to the Bureau of Labor Statistics, Americans’ average annual transportation expenditures rose to $10,742 in 2019.

According to AAA’s report on the average annual cost of new vehicle ownership, Americans spent an average of $9,282 on driving new cars in 2019.

With these two figures in mind, it’s safe to say that U.S. drivers can expect to pay somewhere in the ballpark of $10,000 in driving costs every year.

Costs of car ownership

Some car ownership costs are more apparent than others, but there may be ways to minimize these costs.

  • Insurance: The Insurance Information Institute estimates the average cost of car insurance is $1,004.68, but that average relies on 2017 data, so the cost is probably a bit higher today. Safe driving can dramatically lower the cost of car insurance. It’s also important to select the right amount of coverage; speak with an insurance expert to maximize coverage value.
  • Loans/financing: Last year, the average monthly car loan payment was $554 for a new car and $391 for a used car. Buying a used vehicle in good condition can reduce the auto loan payment as well as future maintenance costs.
  • Fuel: 2019 fuel costs averaged 11.6 cents per mile, roughly a half-cent increase from 2018. Buying a fuel-efficient car can help reduce those costs.
  • Registration and Taxes: Driving fees from registration and taxes vary from state to state. Check out vehicle registration fees in every state, according to the National Conference of State Legislatures. In 2019, the average cost of licensing, registration and taxes was $753.
  • Maintenance: The price of routine maintenance, repairs and tires was 8.94 cents per mile in 2019, according to AAA. The cost of maintaining a car is closely related to the amount of time spent driving, so driving less will reduce these costs.
  • Depreciation: A car’s depreciation varies widely. Brand-new vehicles lose their value fast, so buying used and keeping the car in good shape will lower the depreciation rate.

How to save on car ownership

These are a few things car owners can do to keep costs in check:

  • Shop for cheaper car insurance: Some insurance companies are known for offering cheaper rates, but it’s also important for a car owner to understand their current coverage. Older cars or low-value vehicles may not require as much insurance, and there may be additional discounts offered by the insurance company. Speak with an insurance professional to learn more.
  • Refinance car loan: Some car loans can be refinanced at a lower rate. It’s always smart to check and see if there’s a lower rate available, especially if the market has changed since the vehicle was purchased.
  • Consolidate driving trips: The more a car is driven, the more maintenance it will generally require. It’s a good idea to try to consolidate errands in one trip, carpool with friends and neighbors and research alternative local public transportation options.
  • Maintain the car: When it comes to car maintenance, the best defense is a good offense. Smart car owners get their car checked for routine maintenance a few times a year or more. Early detection of issues can bring repair costs down.
  • Consider leasing a car: Leasing a car might be a good option for those who only drive occasionally. Car leases usually last a few years, and then the vehicle is returned to the lessor or dealership. Car lease payments are generally lower than comparable car loan payments.

When is it time to replace a car?

Sometimes replacing a car is inevitable. Over time, maintenance can become unmanageable, or the car might no longer be a good fit for its owner’s lifestyle. Here are a few situations to consider when thinking about whether or not it’s time to replace a car.

Family changes

Families grow with time, and the car that was ideal for college might not do the trick once kids are in the picture. Typically, a larger vehicle is needed to accommodate car seats.


  • Larger cars have more room.
  • Newer models have modern safety features.


  • Larger cars get lower gas mileage.
  • Buying a new car means taking on more financial responsibility.

Continued maintenance issues

Once a car has been used for many years, it may require constant maintenance. If a car is constantly being taken to the repair shop, it might be time for a new ride.


  • New cars require less maintenance.
  • Newer models are less likely to break down.


  • New cars can tie up discretionary spending for years.
  • Newer models might have computer components that require special maintenance.

Totaled vehicle

If the vehicle has been in an accident or been totaled due to a natural disaster, buying a new car is inevitable.


  • If a covered peril totaled the car, insurance might cover some or all of the replacement cost.
  • Even totaled vehicles can be sold for scrap.


  • If the car was totaled and replacement isn’t covered by insurance, it may be expensive to buy a new vehicle.
  • The value of a totaled vehicle usually decreases, even if restored to working condition.

Fuel efficiency

Alternative energy and new technology have dramatically increased the fuel efficiency of modern cars. Those looking for a car that won’t use a lot of gas (or any at all) can find plenty of hybrid and electric vehicles on the market, and they’re becoming more affordable every year.


  • Fuel costs will go down or be eliminated.
  • Fuel-efficient vehicles have a smaller carbon footprint.


  • Fuel-efficient cars can be more expensive to purchase.
  • Maintenance for hybrid and electric vehicles is often specialized.

Frequently asked questions

What is the best car insurance company?

Car insurance rates and coverage depend on the car, driver, location and more. To find the best car insurance, it’s usually a good idea to compare quotes from a few different insurers and speak with an insurance expert.

How can I get a lower rate on my car insurance?

To get the best rate on a policy, it may be a good idea to research all the discounts and bundles offered by various insurance companies. Many providers give discounts for things as simple as setting up auto-pay on your policy.

Do used cars depreciate as quickly as new cars?

New cars depreciate much faster than used cars. While all cars depreciate over time, new cars lose value simply because they are no longer new, which can mean thousands of dollars in depreciation for new car owners.

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