Owning a New Car Will Cost You $9000 a Year, Says AAA Study
AAA has conducted a cost study on new-car ownership every year since 1950 and has just issued results for 2019—and a worksheet so you can figure your own costs.
New cars on average cost $9282 per year over a five-year/75,000-mile period, a 5 percent increase over 2018, says the nonprofit insurance agency.
Finance charges and longer loan terms contributed most to the increase.
You're not imagining it: New cars are getting more expensive. You're not just paying more once, when you take delivery, but every time you spend money to fuel, fix, finance, insure, register, and watch the car depreciate each year. According to an annual AAA study that the nonprofit insurance group has conducted since 1950, Americans spend on average $773.50 per month on new-car expenses. That's $9282 per year. Where's my raise again?
AAA calculated average costs across 45 popular 2019 models in nine categories, including sedans, SUVs, minivans, trucks, hybrids, and pure electrics. The group's methodology is pretty reasonable in estimating costs over five years or 75,000 miles, such as paying for factory-recommended maintenance, buying a comparable set of new tires, financing for 60 months with 10 percent down, and holding insurance with $100,000/$300,000 limits and a $500 deductible. Sure, your individual mileage will vary—such as how much your town dings you for property tax or if you're prone to dinging other cars—but the costs are real, and they're not fun to think about.
Each mile in a new car costs anywhere from 53 to 79 cents, assuming you didn't buy a new Alfa Romeo (in which case, we hope you don't have to go entire weeks without driving at all). Annual finance charges in AAA's 2019 study surged by almost $200 due to higher federal interest rates, longer-term loans (72 months and up), and average transaction prices that are hovering close to $40,000—another number that keeps rising. New vehicles depreciate more than $3300 a year, AAA said, which accounts for more than a third of the total annual cost.
Compared to 2018, small and medium sedans depreciated less than other vehicle segments in the study. Overall, small sedans were the cheapest to own, at an estimated annual cost of $7114. EVs, despite having the lowest maintenance costs, were $8320. Everyone's favorite vehicle, the mid-size SUV, was $10,265 a year. Ask yourself: How prepared are you to pay 50 grand for a new Honda Pilot or Ford Explorer over five years?
The study doesn't include luxury or sports cars, so Tesla owners bragging how they pay nothing for electricity while they just spent $100,000 on a car won't skew the averages. AAA also doesn't account for inflation, so there's a silver lining. Even though nine grand a year is nothing to sneeze at, it's less than what drivers in 1950 had to shell out when adjusted for today's dollars. For a new car logging 10,000 miles per year, drivers back then paid on average the equivalent of today's 95 cents a mile; in 2019, it's 79 cents. Average gas prices in 1950, according to AAA, might seem cheap at an unadjusted 27 cents per gallon. But using the Department of Labor's inflation calculator to compare prices in August 1950 to August 2019 (the latest month available), it's the equivalent of $2.85 per gallon. In AAA's 2019 study, drivers paid an average of $2.68. A full list of all the cars and methodology is here.
AAA does this to remind us that cars, like homes and college and kids, require long-term planning that a dealership's monthly price won't indicate. Used cars will always be the best way to drive an almost-new car at a fraction of the price, but some of us (like this author) like burning cash on new sports cars. There's no one in AAA who can account for that.
You Might Also Like
