Personal Finance

This Hidden Car Cost Now Runs $3,656 a Year

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It now costs an average of $10,728 per year to own and operate a new vehicle — an increase of more than $1,000 since last year — according to AAA’s 2022 driving costs study.

If that amount sounds steep, it’s because it reflects every cost associated with owning and driving a new car for five years — from financing and insurance to gas and maintenance.

The biggest cost of all — by far — is an expense you don’t necessarily ever see because you don’t pay it in the form of a bill: depreciation. Instead, your wallet takes the hit when you sell or trade in your car.

AAA found that if you buy a new car, depreciation will cost you $3,656 per year, on average. That figure is based on the difference between the new-car purchase price and estimated trade-in value after five years and 75,000 miles. So if you buy a new car and sell it after five years, you would lose a total of $18,280 to depreciation alone, on average.

Choosing your vehicle wisely

One way to lower your car ownership costs is to choose your vehicle wisely.

AAA found that the average cost to own and operate a new car varies widely by vehicle type.

Here’s the motor club federation’s breakdown of new-car ownership and use costs by vehicle type, assuming you drive 15,000 miles annually:

  1. Small sedan — $8,184 per year, on average
  2. Electric vehicle — $9,048
  3. Subcompact SUV — $9,246
  4. Compact SUV (with four-wheel drive) — $9,325
  5. Hybrid vehicle — $9,691
  6. Medium sedan — $10,351
  7. Midsize pickup truck — $10,537
  8. Medium SUV (with four-wheel drive) — $11,305
  9. Half-ton pickup truck (with crew cab) — $12,932

So choosing a large pickup truck like a Ford F-150 or Ram 1500 would mean you’ll pay an additional $2,204 each year compared with the average. But if you choose a small sedan like a Honda Civic or Toyota Corolla, you’d pay $2,544 less than the average each year.

Dodging depreciation

Now, here’s another way to knock thousands of dollars off your car ownership and use costs: Buy used.

After all, depreciation is the No. 1 reason that Money Talks News routinely advises that folks should always buy used vehicles.

As we note in “11 Things You Should Never Buy New”:

“The value of a new car drops like a rock as soon as you drive it off the lot. Rather than finding yourself upside-down on your car loan five minutes after signing the paperwork, look for a quality used car that has already taken the huge depreciation hit.”

According to Carfax, cars lose the greatest amount of their resale value in their first year — around 20%. So even buying a 1-year-old used car can save you thousands of dollars.

To further decrease your depreciation losses, hang on to your car as long as possible. Depreciation costs generally drop off over time.

Keeping your car in good working order and looking good also can minimize depreciation, helping it fetch a higher resale value when you sell it or trade it in.

For help with that, check out “7 Steps to Keep Your Car Looking Like New.”

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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