New vehicle ownership costs have reached an all-time high. Thanks to the global pandemic and semiconductor chip shortage, buying a new car is more complicated than ever before. Here’s a breakdown of how much it costs on average to own a new vehicle in 2021.
New vehicle ownership costs have skyrocketed
According to Car and Driver, the average cost to own and drive a brand new car in 2021 was $9666. Some of the factors that add up to the total cost include insurance, repairs and maintenance, fuel, taxes, registration, tires, depreciation, and more. Depreciation accounts for the biggest chunk of the total cost of operation and ownership.
New cars lose thousands of dollars in value the minute they roll off the lot they were purchased from. 2021 models can lose close to $3,900 of value through just five years of depreciation. That’s close to at least 10% of the total value for most new cars. Even if the vehicle is in pristine condition, time is not kind to most automobiles.
Car insurance is another huge ownership cost for new 2021 vehicles. Annual car insurance for the average 2021 new car cost at least $1,342. New vehicle ownership costs have consistently risen and don’t seem to be letting up anytime soon.
Is owning a new car worth it?
Car ownership depends entirely on your wants and needs. Brand new cars are never necessary. This also happens to be an equally horrible time to buy a used car due to the global semiconductor shortage.
Used car prices have skyrocketed as well. Some used cars are more expensive than brand new cars. Today’s circumstances are uncommon.
Buying a new car is a huge financial decision. The average middle-class American doesn’t have the money saved to just go out and buy a brand new car in cash without major long-term financial implications. Instead, many Americans finance new vehicles using a down payment and credit to secure a manageable loan.
These loans come with interest rates that tack on even more money to the total cost of owning the vehicle. Buying a new car without having substantial savings and a plan of action to finance it and afford costs of ownership is ill-advised. Owning a new car can be awesome, but it can also be a nightmare if you are struggling to pay for it.
Is a brand new car a waste of money?
Buying a brand new vehicle isn’t for everyone. Even if your old vehicle is on its last leg, a newer vehicle is usually more cost-effective than a brand new vehicle. Buying a brand new car can be a waste of money, especially considering all the things that could happen to the vehicle after purchasing it.
Imagine driving your brand new car for the first time and noticing scratches on the body from pebbles on the ride home. There are so many different scenarios that could cause small but noticeable damage to your new car shortly after you take possession of it. Automakers and dealerships have to turn a profit, so new vehicle prices can often be inflated compared to vehicles with light usage. If you do decide you want a new vehicle, the approximate cost of ownership could influence your decision-making for the better.