Do you know how much it costs to own a car?

A new study shows that the cost of owning a new car is rising sharply, but what does this mean for you, and how can you reduce costs?

Cars are one of those places where people have assumptions that they don’t often check out. Here’s a short list of ones I’ve heard:

  • You have to buy a new car, because old ones are unreliable.
  • You have to own a car.
  • You have to have a car loan.
  • A larger car is always safer than a smaller one.
  • You need to buy a vehicle big enough for all your needs.

Now, none of these are true, but I bet there’s at least one of them that you’d argue with. (Feel free to argue in the comments below.)

But when it comes to car ownership, do you know how much it costs to own your car? Not to buy it, but to own it? I bet you don’t.

To be honest, I didn’t either. Which is why a new report on the cost of car ownership was so eye-opening to me.

Cost of ownership study

A study published by AAA, the American hotel discount roadside assistance car club stated that the yearly cost of owning a new car in 2022 was a little over $12,182, up sharply from 2021 where it was $10,728, and 2020 where it was $9,666.

Why the sharp rise in costs? The New York Times analysis suggests that “higher car prices and the surging costs of financing, insuring and maintaining a new car all contributed to the increase. The analysis also considered depreciation a cost even though it’s not paid out of pocket.”

So this study is saying that the true total cost of owning and maintaining a vehicle, after costs and insurance and fuel and everything else, turns into about $1,000 a month.


I should note that this study is severely weighted toward “new car” costs, which have a different cost portfolio from a used car. And because I wasn’t able to get at the raw data they used to conduct their survey, it’s unclear how the situation would change if dealing with an older car.

Cars depreciate fairly significantly after only a few years. Source: Schibsted

In fact, I haven’t even been able to find a good car ownership calculator for any cars older the 5-6 years, which to me isn’t very helpful. So the study may be more useful when looking at the trend and less at the raw numbers. And from this, we see that the car of car ownership (assuming all equal) grew 11% in 2021, and another 14% in 2022.

Yikes. That’s matching how college tuition is rising.

How to calculate this for yourself

Your situation is probably different from the average. So how do you calculate how much your own car ownership is?

The way to do this is to add up every cost of car ownership over a year, and then divide by 12. This includes things like:

  • Car loan
  • Insurance (premiums, deductibles, and payments)
  • Gas
  • Repairs
  • Supplies (consumables)

And anything else that goes along with your car.

I have a rather old car, and don’t drive very many miles per year, so when I did this, I came up with a value somewhere in the $3,000-$4,000 range. That’s a lot, but far less than the $12,000 value AAA quotes above.

How to reduce your total cost of car ownership?

A lot of your ability to reduce car costs involves what car you own, so there’s not a ton you can do to reduce costs on your existing car, short of driving less.

But when the time comes to purchase a different car, you have lots of options:

  • Buy an older car. As the age of the car increases, it’s cost decreases. The plot isn’t linear but anywhere between 3-10 years old would be a good sweet spot for savings while still having a long car life. And if you can save up for the car in advance, you won’t have a car loan.
  • Buy a smaller car. I know everyone thinks they’re safer in a giant vehicle, but you’ll be paying for that extra weight in fuel costs. Plus, if you’re buying a car because you might need to haul loads every once in a while, buy a smaller car now and rent a truck when you need it.
  • Buy a reliable car. While cars are generally all very reliable these days, some cars just have fewer problems than others.
  • Don’t buy a luxury car. Any car that requires premium gas or specialized parts is going to massively jack up your costs.
  • Get the right insurance. Lower premiums will mean higher deductibles, which can hurt when accidents happen, but will still be less painful if you have a sinking fund for it.
  • Don’t own a car. I have to add this one in here, because it can be an option for some people. Strategic renting of vehicles or using car-sharing services like ZipCar can allow you the freedom of driving without the burden of maintenance.

Be prepared

Car ownership, like everything else, is rising. And while we may not be able to do much about our car costs right now, we all owe it to ourselves to be thinking about the future, because we can make more changes than we think with a little bit of planning.

And if you’re not saving up for your next car now, it’s almost certainly time to start.

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