New Study Finds Drivers Underestimate the Annual Cost of Car Ownership by More Than $4,500
According to a recent study, drivers significantly underestimate the annual cost of car ownership, paying about 167% more than they expected. This discrepancy between projected and actual expenses may negatively affect household budgets and reduce consumer spending in other areas.
In a Cost of Car Ownership Survey of 1,030 consumers aged 18+ from around the United States, conducted by consumer financing company Synchrony, car owners estimated they spend $2,738 a year on their vehicles, excluding loan and lease payments. However, according to the report, the true annual cost is $7,303.
For younger drivers, the difference in estimated and actual car ownership costs is even greater. Gen Z and Millennials reportedly spend an average of $9,984 and $10,101 annually, respectively.
When it comes to car maintenance, Gen Z and Millennials spend the most, spending $976 and $768 per year, respectively, well above the average of $622. Similarly, Gen Z and Millennials are spending far more than the average of $659 on service and repairs at $983 and $931, respectively.
What are all of these costs of car ownership?
The most significant expense among these costs is car insurance. Tires, motor components and accessories, and maintenance and repairs are other major costs. Costs also include ongoing items like gas, tolls, parking, and car washes.
In a 2024 study, nearly 60% of Americans said they were choosing to keep their vehicles longer to avoid the financial burden of a new purchase. That attitude is only being reinforced by the fact that for the first time ever, the average transaction price for purchasing a new vehicle in the United States has surpassed $50,000.
Rising car prices and maintenance costs are also causing a decline in multi-car households. The study found that only 25% of respondents have two cars at home, with 65% owning just one. In the 2023 U.S. Census, 37% of households had two vehicles, and 22% of households owned three cars or more.
“The disparity between perceived and actual spending can create real financial strain for drivers who may not be budgeting for the true cost of car ownership,” said Curtis Howse, EVP & CEO, Home and Auto, Synchrony.
