The annual cost of owning a car exceeds $10,000
For more than 70 years, AAA’s Your Driving Costs study has provided consumers with information on the average cost of owning and operating a new automobile.
According to the latest AAA research, the average annual 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 annual cost was $9,666 or $805.50 per month.
Fuel prices are the most important factor pushing the average annual price this year.
“Consumers are paying more attention when buying a new vehicle because everything is more expensive right now,” said Patti Artessa, regional director of public and government affairs for AAA Northeast. “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.”
In the most recent analysis, the AAA evaluated nine vehicle categories – made up of 45 models – to determine the average annual operating and ownership costs of a new vehicle.
AAA selects the best-selling mid-priced models and compares them in six categories: fuel, maintenance/repair/tire costs, insurance, license/registration/taxes, depreciation and finance charges. The study assumes an ownership period of five years, with the vehicle driven 15,000 miles/year (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 this period, fuel prices averaged 17.99 cents per mile or 3,999 $ per gallon. Gasoline prices have risen dramatically since the beginning of March, and as a result, the cost of owning a vehicle has risen accordingly since the Your Driving Costs assessment was completed. Due to the wide variability in fuel costs, consumers are considering other ways to budget for the cost of vehicle ownership. To do this, they are notably exploring electric vehicles as an option for their next car purchase. In fact, a recent AAA consumer survey found that the biggest driver behind Americans’ desire to buy an electric vehicle is to save on fuel costs.
This year’s Your Driving Costs analysis reveals that electric vehicles have the lowest annual ownership costs behind small sedans. By comparison, an electric vehicle owner will spend about 4.0 cents per mile to charge their vehicle at home, while a gasoline vehicle owner will spend an average of 18.4 cents per mile to refuel. Assuming both travel 15,000 miles/year, it would cost around $2,700/year to power the gasoline 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, replacement of air filters, and inspection of mechanical components that are not present in electric vehicles. Additionally, electric vehicles have the lowest fees due to federal and state rebates offered to new electric vehicle buyers as a purchase incentive.
New this year, AAA has launched an online calculator of your driving costs to provide a more interactive and personalized breakdown for car shoppers. This online tool uses the same methodology as the AAA’s annual analysis of new car ownership. It allows users to view comprehensive cost analyzes of a specific vehicle by category to determine which ownership costs best fit their budget. Data is available for new and used vehicles (five model years ago), and consumers can personalize results based on location and other personal driving trends.
Consumers can also use the AAA Car Guide to learn about the latest automotive technologies and find the vehicles that best meet their needs. AAA’s Car Buying Program is a search tool to help consumers research vehicles available in their area, locate dealerships and compare prices.
AAA urges car buyers to know all of the expenses associated with ownership to negotiate the best deal for their budget, and recommends consumers follow these steps before buying:
- Start early! Due to limited inventory, consumers may have fewer choices regarding a specific vehicle model and may have to wait for delivery or even pre-order the vehicle of their choice;
- Obtain pre-approval from a financial institution (eg, bank, credit union, AAA, etc.) before discussing financing rates with the car dealership. By getting pre-approved, buyers will have a threshold of the best loan rate they will pay. Buyers can use their pre-approval to negotiate if the dealer offers a higher rate;
- Create a budget and consider different elements of ownership before purchase, not just monthly payments. Other factors to consider when setting the budget include insurance, gas, routine maintenance, etc.;
- Generally, three negotiations take place when buying a vehicle: the cost of the car, the financing rate and the trade-in value. Keep each transaction/negotiation separate from the others.