The cost of owning a car

The majority of Americans require a vehicle. Unless you live in a city with a good public transportation system, your car will most likely help you get around. But, in this day and age of decades-high inflation, do you know how much your car really costs you? StrongInsurance investigates the true cost of car ownership to assist you in understanding how your vehicle affects your bottom line.

What is the average cost of owning a car?

The cost of purchasing a new or used car has risen significantly due to inflation and supply chain issues. According to Kelley Blue Book, a used car will cost an average of $28,012 in June 2022, while a new car will cost an average of $48,043. These prices are enough to make many customers cringe, but the sticker price of a vehicle is only the beginning of a long list of expenses that come with owning a vehicle.

The cost of owning a car includes insurance, gas, maintenance, and other expenses. According to AAA research, the total cost of owning a new vehicle in 2021 will be $9,666, in addition to the vehicle's purchase price. Keep in mind that in 2021, the country had not yet experienced the scorching inflation that has gripped the country in 2022. The Bureau of Labor Statistics (BLS) predicts a 9.5 percent increase in all transportation costs (excluding gas) between June 2021 and June 2022. The cost of owning a car in 2022 is likely to be significantly higher than it was in 2021.

Costs associated with car ownership

Some costs of car ownership are more obvious than others, but there may be ways to reduce these costs. Here are some things to think about if you're buying your first car or just want a refresher on what car ownership entails.

Insurance

In 2022, the average cost of full coverage car insurance is $1,771, but your premium will vary depending on the type of vehicle you drive, your driving history, the insurance company you choose, and the types and levels of coverage you purchase. Safe driving can significantly reduce the cost of car insurance by protecting you from surcharges. It is also critical to choose the appropriate level of coverage for you. Speaking with an insurance professional can help you maximize the value of your car insurance coverage.

Financing

According to Experian, monthly loan payments for new cars have risen to an average of $667, while monthly payments for used vehicles have risen to an average of $515. Unsurprisingly, these amounts have risen in line with inflation. Purchasing a good-condition used vehicle may lower your auto loan payment and future maintenance costs.

Fuel

Gas prices have been in the news a lot lately, and for good reason. According to the auto club AAA, the national average has dropped from just over $5.00 per gallon in mid-June to $4.30 per gallon as of July 27. However, some states continue to face much higher prices. California drivers pay the most, with an average of $5.69 per gallon, down from a high of $6.44 per gallon in mid-June. Consider your commute when calculating gas prices; the more you drive, the more you'll pay at the pump.

Registration

The registration fee varies by state. The National Conference of State Legislatures has a list of vehicle registration fees in each state.

Maintenance

According to AAA, the cost of routine maintenance, repairs, and tires in 2021 will be $9.55 cents per mile, with the average annual cost of auto repairs in the United States being $1,425. However, the BLS reported a 7.9 percent increase in overall vehicle maintenance costs between June 2021 and June 2022, so maintaining and repairing your vehicle is likely to cost more now than it did last year. The cost of car maintenance is directly proportional to the amount of time spent driving, so driving less may lower these costs by reducing wear and tear.

Depreciation

Depreciation isn't technically a 'cost,' but it is something to keep in mind because the value of your car decreases the moment you drive it off the lot. The depreciation of a car varies greatly. According to AAA, the average annual cost of depreciation in 2021 is $3,900. New vehicles lose value quickly, so buying used and maintaining the vehicle in good condition can help reduce the rate of depreciation.

How to save on car ownership

Although the cost of car ownership can be high, owners can cut costs by doing the following:

• Shop for cheaper car insurance: Because some insurance companies are known to offer lower rates than others, obtaining and comparing quotes from multiple providers may be a wise decision.
• Refinance your car loan: Some automobile loans can be refinanced at a lower interest rate. Check to see if a lower rate is available, especially if the market has changed since the vehicle was purchased. With interest rates on the rise, now might be a good time to take this step.
• Consolidate driving trips: Generally, the more you drive your car, the more maintenance it will require. Consolidating errands into one trip, carpooling with friends and neighbors, and researching alternative local public transportation options may be a good idea. Driving less may result in lower auto insurance costs, particularly if you participate in a telematics programme.
• Maintain your car: The best defense against vehicle repair costs is a good offense. Routine maintenance may help to avoid higher repair costs in the future. Early detection of problems can frequently reduce repair costs.

When is it time to replace a car?

Vehicles do not last forever, so you will need to replace yours at some point. Maintenance can become unmanageable over time, and the car may no longer be a good fit for your lifestyle. Here are a few scenarios to consider when deciding whether or not to replace a car.

Family changes

Families change over time, and your ideal vehicle may need to evolve as well. A larger vehicle, for example, may be required to accommodate car seats.

Continued maintenance issues

After many years of use, a car may require more frequent maintenance. If a vehicle is constantly being repaired, it may be time for a new ride. You can even do some math to see if the cost of maintaining your current vehicle outweighs the cost of purchasing a new one.

Totaled vehicle

If your car was in an accident, was totaled due to a natural disaster, or was stolen, you may have to buy a new or new-to-you car. You can take advantage of the opportunity to shop around for a vehicle that meets your current needs and budget.

Fuel efficiency

Alternative energy and new technology have significantly improved the fuel efficiency of modern automobiles. Those looking for a car that won't use much (or any) gas will find plenty of hybrid and electric vehicles on the market, and they're becoming more affordable by the year.

Budget changes

If your budget has recently changed, your vehicle may no longer meet your new requirements. For example, suppose you've taken a lower-paying job and are struggling to make ends meet with your car payment. Maybe it's the other way around: you're making more money and can finally afford your dream car.