Cars are getting more and more expensive as the years go on. According to Kelley Blue Book, the average price for a new car is currently $43,000. And while that stratospheric price tag alone is sobering to many current car buyers nationwide, what’s more surprising is how much it costs to own a car in 2021. It’s likely more than you think.
The cost of cars is increasing, but so is the cost of driving them
While it might not cost some buyers over $40,000 to buy a new car, it will still cost most drivers a lot just to own one. Of course, it’s hard to say exactly how much every driver will pay annually to own their car, considering different situations will lead to different results. On average, owning a car in 2021 costs around $10,000, according to a “Driving Cost” study conducted by AAA, the automobile club.
To be exact, it’s $9,666, which divides into $805 a month and is $105 higher than it was in 2020. Market Watch posits that the rising overall costs stem from a couple of different factors such as the global chip shortage and the fact that Americans are gravitating toward more expensive cars. “Models in the small sedan, medium sedan, medium SUV and hybrid categories averaged an increase in vehicle price of $3,064, led by hybrids as consumers opt for larger (hence more expensive) models in this category. Pickup trucks saw an increase of $4,684 (an average of 11%),” AAA explains.
Consumers need to be aware of all of the car ownership costs
Buying a new car and paying a monthly payment for it is one thing, but the cost to maintain and insure is another.
“Consumers have to remember the expense of owning a car goes far beyond the monthly payment. Plus, we are seeing costs increase for a number of products recently, and cars are no exception. This trend will likely continue as new vehicles come equipped with the latest technology, which naturally drives up the sticker price.”Greg Brannon, AAA’s director of automotive engineering and industry relations
The study also factored in six different expense categories when owning a car: fuel, maintenance, insurance, registration/taxes, depreciation, and finance charges. As it turns out, depreciation is the single biggest cost when owning a new car as it accounts for around 40% of the overall amount. Fuel costs come second at an average of 10.72 cents per mile, while electric car owners pay an average of 3.66 cents a mile.
Maintenance and repair cost an average of 9.55 cents per mile for gas-powered car owners, while EV owners pay around 7.77 cents per mile. Surprisingly, medium sedans have the highest maintenance costs at 10.43 cents per mile. Fortunately, the cost of financing a car is down at the average interest rate in 2021 is 4.12%, which is one percent lower than in 2020.
Car shopping tips from AAA
While the rising price of cars and ownership might be enough to deter you from purchasing a car altogether, don’t be too discouraged. AAA has a couple of tips for any new car shoppers at this time:
- Don’t sign up for longer loan terms: A longer loan term might look attractive due to the lower monthly payments. But buyers should be aware that the car can end up being worth less than the money owed on the loan as time goes on.
- Buy a slightly used vehicle: If you’re able to get away from the notion of buying a brand-new car, then buying a slightly used one can yield a lower price and a lower overall cost of ownership.
- Negotiate more than the price of the car: AAA also recommends that buyers negotiate the financing interest rate and the value of their trade-in when purchasing a car. Doing can lead to more money saved.
While the rising price of new cars, as well as the cost to own and maintain them, can be deflating, it’s important to understand how much the car you want will cost you in reality. If you’re shopping for a new car, then calculate all of the costs of ownership, not just the car, it could end up saving you money.