Owning a Car is Getting More Expensive in America; Here's How Motorists can cut Costs
Historically, car ownership has been an essential part of the American lifestyle, but rising insurance premiums, vehicle prices, and repair costs have hindered accessibility. These costs vary based on factors like vehicle type, location, and driving history. According to AAA, the average monthly cost of owning a new car in 2023 was $1,015, reflecting a 13.5% increase compared to 2022, via Forbes.
Shifts in car ownership costs
Rising cost of living and supply chain issues are among the major factors that have driven up car ownership costs, and in January 2024, the average price for a non-luxury vehicle was projected to be $44,052 even though the costs of new cars have decreased slightly. There are unavoidable costs associated with car ownership beyond the manufacturer's suggested price which include sales tax, local taxes, and vehicle taxes, which must be paid during registration at the Department of Motor Vehicles. Dealerships typically charge additional fees on top of the car's price. Some of these fees like taxes and licensing are mandatory while others can be negotiated. The interest rate on your car loan also plays a significant role in determining the overall cost of ownership. Factors such as your down payment, credit score, and whether you're buying a new or used car will influence your interest rate.
Things to consider when buying a car
When considering car ownership, the cost of auto insurance is often overlooked. As of January 2024, the average annual premium is $2,542 for comprehensive coverage and $740 for basic coverage. Individual premiums vary based on factors such as location, vehicle type, driving history, age, and creditworthiness. For example, a driver with an accident on their record may pay 41% more for full coverage than an accident-free driver.
Due to the escalating expense of new vehicles and exorbitant interest rates on auto loans, people are opting to retain their current cars for longer. The average vehicle on the road reached 13.6 years of age in 2023. Repairs are becoming increasingly costly due to factors such as inflation and supply chain disruptions. Americans spend around $545 annually on automobile upkeep. More than 20% of Americans lack emergency funds, making even minor expenses like new tyres or brake pads burdensome.
Tips for current and aspiring car owners
Whether you're looking to buy a new car or trying to manage the costs of the ones you already own, there are ways to make owning a car more affordable.
Compare quotes for several types and models of auto insurance to figure out which ones best suit your insurance needs.
In many jurisdictions, raising your credit score can result in reduced auto loan interest rates and cheaper auto insurance. Examine auto loans offered by banks, credit unions, and online lenders to identify those with the best terms, minimal costs and low-interest rates.
Find out how reliable and expensive the typical repairs for the car models you're considering are. Domestically manufactured auto parts are frequently less expensive to fix and insure.
Regularly compare car insurance quotes and review your coverage options to find the most affordable insurance for your needs. Drive safely to avoid tickets and accidents, which can save you from unnecessary costs and keep your insurance premiums stable.
Consider switching to pay-per-mile or usage-based insurance if you don't drive much or have a vehicle with low mileage.