The Average Cost of Car Ownership

The actual cost of car ownership is around $12,000 per year on average, according to estimates from the Bureau of Labor Statistics and AAA. Those estimates include a range of costs, from maintenance to insurance, registration fees, and more.

Understanding how those expenses break down is crucial to budgeting for buying a car. Read on for a look at the average car payment, car insurance costs, vehicle depreciation, and more.

The average cost of car ownership

The average cost of car ownership is around $12,000. The Bureau of Labor Statistics found that Americans spent $12,078 on car ownership costs in 2023, while AAA estimates that in 2024, Americans will spend $12,297. Both estimates come out to around $1,000 per month.

Here's what each estimate includes:

• BLS: Vehicle purchases, gas, oil, finance charges, maintenance and repairs, vehicle rentals, leases, licenses, and insurance.
• AAA: Depreciation, gas, finance charges, maintenance, repairs, tires, licenses, registrations, taxes, and insurance.

Here's how those costs break down:

The average cost of vehicle purchase spending

BLS: $5,539 per year (46% of car ownership costs) on vehicle purchase net spending plus $361 (3% of car ownership costs) on financing charges

AAA records this type of expenditure in two ways, depreciation and finance costs.

• Depreciation, the difference between the vehicle purchase price and trade-in value after five years and 75,000 miles, are $4,680 (38% of car ownership costs) on average in 2024.
• Financing costs are $1,332 (11% of the car ownership costs).

Both BLS and AAA report that these types of expenses amount to 49% of the total cost of owning a car.

Car ownership costs also depend on whether the vehicle is new or used. The average annual spending on new vehicle purchases in 2023 was $2,896, while used vehicle spending averaged out to $2,585, about $300 less, according to BLS. Used car prices have remained elevated for a number of years due to low supply and high demand.

The average cost of gas as part of car ownership

BLS: $2,694 per year (22% of car ownership costs).

AAA: $0.15 per mile. At 15,000 miles a year, the annual cost of gas is $2,235 (18% of car ownership costs).

The cost of gas as a percentage of the real cost of owning a car can swing significantly each year along with the price of gas. According to AAA, gas made up 25% of vehicle ownership costs in 2022, compared to 17% in 2021 and 20% in 2023.

Hybrids and electric vehicles (EVs) come with much lower fuel costs, particularly for EVs, although they may be more expensive overall. A breakdown of car ownership costs for each of those types of vehicles is below.

The average cost of car insurance

BLS: $1,775 per year (15% of car ownership costs)

AAA: $1,715 (14% of car ownership costs)

Car insurance costs continue to rise. Americans spent an average of $976 on car insurance in 2018, according to BLS. A year later, those costs grew by 58% to $1,545.

While how much the average American spends on car insurance hasn't grown at that pace since, costs are still rising. From 2022 to 2023, spending on car insurance grew by 11% alone, on average.

Car insurance has become more expensive for a few reasons. There are more claims and those claims are more severe, costing insurance companies more money and making vehicles more expensive to insure.

The industry has suffered with shortages and labor and parts, which has driven up costs. And vehicles are becoming more technologically advanced, which makes the parts and labor required to repair them more expensive and hard to come by.

The average cost of car maintenance and repairs

BLS: $975 per year (8% of total car ownership costs)

AAA: $0.10 per mile. At 15,000 miles a year, the annual cost of maintenance, repairs, and tires is $1,520 (12% of total car ownership costs).

Vehicle maintenance and repairs can be expensive. Some maintenance is regular and comes with a predictable price tag, like tire rotations, buying new tires, or oil changes.

Unexpected maintenance costs, however, are also included in this category. Those can come from an accident or a sudden issue that arises from vehicle wear and tear, and may be more expensive.

The average car license, registration, and taxes costs

BLS: $734 per year (6% of car ownership costs)

AAA: $815 (7% of car ownership costs)

License, registration, taxes, and other fees can cost around $700 to $800 a year. These fees are different in every state and may depend on vehicle make and model. For example, some states have implemented an additional annual fee for EV registration renewals to make up for a shortfall in tax revenue they would have otherwise collected at the gas pump.

The average cost of car ownership by type: gas, electric, and hybrid

Among the most popular vehicle types, the cheapest to own is a hybrid medium-sized sedan, followed by a hybrid compact SUV, according to AAA.

Hybrids offer the lowest annual cost and cost per mile across vehicle types with the exception of pickup trucks, where they're about $300 more expensive to own on an annual basis and $0.02 more expensive per mile than an electric pickup.

Electric pickup trucks are cheaper to own on an annual basis than gas and hybrid pickups, likely due to savings on fuel and maintenance.

Electric medium-sized SUVs are slightly cheaper than their gas counterparts but more expensive than hybrids.

In the medium sedan and compact SUV categories, electric vehicles are two to three thousand dollars per year more expensive than hybrid and gas vehicles. EVs have relatively stable costs outside of the pickup truck category, which suggests that fuel, maintenance, and insurance costs don't vary much by the size of an EV, while those costs can fluctuate for gas-powered cars.

The relative newness of EVs and modern hybrids could create additional hidden costs over the lifetime of a vehicle, Ivan Drury, Director of Insights at Edmunds, told Motley Fool Money.

“Consider that vehicles with higher-rated MPGs might not always be worth the premium of going to an alternative powertrain,” he said, “especially if the vehicle is leased and there is a lower annual mileage limit.”

Drury added, “maintenance and repair costs are up, with specialized systems on certain services (like oil changes) demanding higher-quality parts and expertise, especially for hybrid and electric vehicles.”

How the total cost of car ownership has changed over time

Car ownership costs have risen in recent years, with the largest increases occurring in 2021, 2022, and 2023 as the industry faced shortages of labor and parts. Increased technological sophistication, like added sensors and connectivity features, have increased the cost of parts and labor for repairs.

"Advanced vehicle technologies, while valuable and appreciated, also come with higher upfront costs, further contributing to the overall expense of car ownership," Ta'Donna Nagle, Founder of Legendary Wealth Builders said.

Those shortages had knock-on impacts that put more upward pressure on vehicle prices and rising car insurance premiums.

“Maintenance and repair costs reflect both the inflationary pressures of recent years and sticky supply chain challenges,” J.J. Montanaro, CFP and Director at USAA, told Motley Fool Money.

Austin Shivers, Automotive Engineer at AAA, added, “examining the long term, vehicle ownership costs generally track with inflation, since increased costs of goods and services directly affect each component of vehicle ownership expenditures.”

That put a bottleneck on new vehicle production, which increased demand for the limited number of used cars on the market, making those vehicles more expensive as well.

While the overall cost of vehicle ownership has begun to stabilize, finance costs have been on the rise since 2021 as the Federal Reserve increased rates. The Federal Reserve began to cut rates in September 2024 which could put downward pressure on finance costs. Melinda Zabritski, Head of Automotive Financial Insights at Experian, told Motley Fool Money, “we are beginning to see, at least the average loan amount, for a new and used vehicles stabilize, and actually decrease in some instances."

How to save on car ownership costs

Understanding how much each aspect of car ownership costs can set vehicle owners up for savings. Sometimes, the biggest savings can be found in the most expensive aspects of car ownership. Here are some tips to get started.

Research a vehicle that fits your needs and budget

Saving on car expenses starts with understanding what type of vehicle aligns with your driving needs and your budget. Those who have a long daily commute may focus on highway fuel efficiency while someone who drives sparingly and just for short distances may want to opt for a hybrid or EV, or a smaller car.

“Purchase the vehicle you need, not the one you want,” Shivers of AAA advises.

Understanding maintenance needs, reliability, and insurance rates attached to particular vehicles is another important aspect of determining whether a car under consideration fits your budget.

“Choosing a car that truly suits a shopper’s needs, preferences and lifestyle is critical, as compromise could lead to an early return to the market, potentially creating negative equity if the car’s trade-in value is less than what’s owed,” Drury from Edmunds notes. He explained that nearly a quarter of vehicle trade-ins for a new vehicle purchase had negative equity in the third quarter of 2024.

Montanaro from USAA added, “the best place to save is at the beginning, looking beyond the initial cost and considering how total cost of ownership fits into your budget.”

That type of preparation can help when it's time to negotiate with the dealer. "Arriving at the dealership with a clear understanding of what you’re looking for and well-prepared for discussions can give you a distinct advantage," Nagle said.

Prepare your credit score

A strong credit score can yield better auto loan terms and a lower rate. Knowing your credit score before you begin to shop for a vehicle and taking steps to shore it up prior to making a purchase can net savings.

“We recommend people check their credit reports about three to six months ahead of a major purchase, such as a car, so they know what to expect before heading into the dealership," Zabritski of Experian said.

Shop around for car insurance

Auto insurance companies will offer different quotes based on their own ways of assessing risk. Comparing quotes at least once a year can lead to big savings.

You may also uncover other car insurance discounts or opportunities to bundle policies which can lower costs even further.

Refinance and find the best car loan

Refinancing your auto loan can yield a lower interest rate and monthly payment. Be wary of electing for a longer repayment period to lower your monthly payment. If the value of your vehicle depreciates more quickly than your loan payoff, you may end up underwater.

Look for gas credit cards

The best gas credit cards can earn you significant cash back every time you spend at the pump. With folks spending over $2,000 on gas a year, that can put a large chunk of change back in your pocket.