Why the Annual Cost of Owning a New Car is Now Over $10,000
For over 70 years, AAA’s Your Driving Costs has provided members, consumers, and the media with information on the average costs of owning and operating a new automobile. According to the latest research from AAA, the average yearly cost to own and operate a new vehicle in 2022 is $10,728, or $894 per month. A considerable increase from 2021, when the average yearly cost was $9,666 or $805.50 per month. Not surprisingly, fuel prices are the most significant factor pushing this year’s average annual price tag.
“Consumers are paying more attention when purchasing a new vehicle since everything is more expensive right now,” said Greg Brannon, AAA’s director of automotive engineering. “With the recent increase in fuel prices, more and more people want to know the true costs of owning a car beyond their monthly payment.”
The 6 Categories of Ownership Costs
In the most recent analysis, AAA evaluated nine categories of vehicles – consisting of 45 models – to determine a new vehicle’s average annual operating and ownership costs. AAA selects top-selling, mid-priced models and compares them across six categories: fuel, maintenance/repair/tire costs, insurance, license/registration/taxes, depreciation, and finance charges. The study assumes a five-year ownership period, with the vehicle being driven 15,000 miles/annually (or a total of 75,000 miles).
For this year’s study, fuel costs were projected based on a weighted average of the first five months of 2022. During that time, fuel prices averaged 17.99 cents per mile or $3.999 per gallon. Gas prices have seen a dramatic climb since early March, and, as a result, the cost of vehicle ownership has increased accordingly since the Your Driving Costs evaluation was completed. Because of the high variability of fuel costs, consumers are considering alternative ways to budget for the cost of vehicle ownership. One way they do this is by exploring electric vehicles as an option for their next car purchase. In fact, a recent AAA consumer survey found the main factor behind Americans’ desire to buy an electric vehicle is to save on fuel costs.
Why Electric Vehicles Cost Less to Own
This year’s Your Driving Costs analysis reveals that electric vehicles have the second lowest annual ownership costs behind small sedans. For comparison, an electric vehicle owner will spend about 4.0 cents per mile to charge their vehicle at home, while the owner of a gas-powered vehicle will spend an average of 18.4 cents per mile to gas up. Assuming both drive 15,000 miles/year, it would cost approximately $2,700/year to fuel the gas-powered vehicle and $600/year to charge the electric vehicle. A difference of $2,100 annually.
Beyond fuel savings, electric vehicles have the lowest maintenance, repair, and tire costs. This is because gas-powered vehicles require additional maintenance such as oil changes, air filter replacements, and inspection of mechanical components not present in electric vehicles. Additionally, electric vehicles have the lowest fees due to federal and state rebates offered to buyers of new electric vehicles as a purchase incentive.
How to Calculate Your Car Costs
New this year, AAA launched an online Your Driving Costs calculator to provide a more interactive and personalized breakdown for car shoppers. This online tool employs the same methodology as AAA’s annual analysis of new car ownership. It allows users to view comprehensive cost analyses of a specific vehicle by category to determine ownership costs that best align with their budget. Data is available for new and used vehicles (five model years back), and consumers may customize the results based on location and other personal driving tendencies.
Consumers can also use the Car Guide to learn about the latest automotive technology and research vehicles that best suit their needs. AAA urges car buyers to know all the expenses associated with ownership to negotiate the best deal for their budget and recommends consumers follow these steps before purchasing:
- Start early! Due to limited inventory, consumers may have fewer choices regarding a specific vehicle model. They may have to wait for delivery or even pre-order the vehicle of their choice.
- Obtain pre-approval from their financial institution (e.g., Bank, Credit Union, AAA, etc.) before discussing finance rates with the car dealer. By getting pre-approval, they will have a threshold of the best lending rate they’ll pay. Buyers can use their pre-approval to negotiate if the dealer offers a higher rate.
- Create a budget and factor in the different elements of ownership before purchase – not just monthly payments. Other factors to consider when making the budget include insurance, gas, routine maintenance, etc.
- Typically, three negotiations occur when purchasing a vehicle – the cost of the car, the finance rate and the trade-in value. Keep each transaction/negotiation separate from the other.
AAA uses a proprietary methodology to calculate the costs of owning and operating a new car in the United States. Data is gathered from a variety of sources including Vincentric LLC, and incorporates standardized criteria to estimate the costs of using a new vehicle for personal transportation over five years and 75,000 miles of ownership. The use of standardized criteria ensures AAA estimates are consistent when comparing the driving costs of different vehicle types. Actual driving costs will vary based on driving habits, location, operating conditions and other factors.