Although the price of new cars has risen in 2021, it is important to know the cost of owning and maintaining them. If you are buying a new car, calculate all the costs of ownership, not just the car, you could end up saving money.
Cars are getting more and more expensive as the years go by. According to Kelley Blue Book, the median price for a new car is currently $ 43,000. And while that stratospheric price tag alone is sobering for many current car buyers across the country, what’s more surprising is how much it costs to own a car in 2021. It’s likely more than you think.
The cost of cars is rising, but so is the cost of driving them
While it may cost some buyers no more than $ 40,000 to buy a new car, most drivers will find it hard to just own one. Of course, it is difficult to say exactly how much each driver will pay annually to own their car, considering that different situations will lead to different results. On average, owning a car in 2021 costs about $ 10,000 , according to a “Driving Cost” study conducted by AAA , the car club.
To be exact, it’s $ 9,666, which is divided into $ 805 per month and is $ 105 higher than in 2020. Market Watch posits that the increase in overhead costs is due to a couple of different factors, such as the global shortage of chips and the fact that Americans are gravitating toward more expensive cars.
Models in the small sedan, midsize sedan, midsize SUV and hybrid categories averaged a vehicle price increase of $ 3,064, led by hybrids as consumers opt for larger (therefore more expensive) models. ) in this category. The trucks registered an increase of $ 4,684 dollars (an average of 11%) ”, explains AAA.
Consumers should know all the costs of car ownership
Buying a new car and paying a monthly payment for it is one thing, but the cost of maintenance and insurance is another.
“Consumers should remember that the cost of owning a car goes well beyond the monthly payment. Additionally, we are seeing rising costs for various products recently, and automobiles are no exception. This trend is likely to continue as new vehicles come equipped with the latest technology, which naturally drives up the tag price, ”says Greg Brannon , AAA’s director of automotive engineering and industrial relations.
Expenses to consider when buying a new car
The study also looked at six different expense categories when owning a car: fuel , maintenance , insurance , registration / taxes , depreciation, and finance charges . It turns out that depreciation is the single biggest cost in owning a new car, accounting for about 40% of the total amount. Fuel costs come in second with an average of 10.72 cents per mile, while electric car owners pay an average of 3.66 cents per mile.
Maintenance and repair cost an average of 9.55 cents per mile for gasoline car owners, while electric vehicle owners pay about 7.77 cents per mile. Surprisingly, midsize sedans have the highest maintenance costs at 10.43 cents per mile. Fortunately, the cost of financing a car has dropped at the average interest rate in 2021 is 4.12%, which is 1% lower than in 2020.
Car Buying Tips
While rising car prices and ownership may be enough to put you off buying a car altogether, don’t be too discouraged. AAA has a couple of tips for new car buyers right now:
1. Don’t sign up for longer loan terms
A longer loan term may seem attractive due to the lower monthly payments. But buyers should be aware that the car may end up being worth less than the money owed on the loan as time goes on.
2. Buy a lightly used vehicle
If you can get away from the notion of buying a new car, buying a slightly used car can lead to a lower price and a lower total cost of ownership.
3. Negotiate more than the price of the car
AAA also recommends that buyers negotiate the financing interest rate and their trade-in value when purchasing a car. Doing so can save you more money.