Buying a new car? Prepare for over $10K in annual cost of ownership | Business news

The annual cost of owning and operating a new car rose nearly 11% last year to $10,728 — or $894 a month — according to AAA’s Your Driving Costs study.

That’s a significant increase from 2021, when it cost about $9,666 to buy a new car, or $805 a month. Costs typically don’t rise this dramatically year-over-year, with annual new car ownership costs rising 5% in 2021 compared to 2020, according to AAA.

The cost estimate in the 2022 study doesn’t include a monthly principal payment for those taking out a loan, so drivers will need to make sure they budget for full cost of car ownership when buying a new car.

Why does a new car cost more?

Not surprisingly, the AAA report named fuel prices as the main culprit for this year’s skyrocketing growth. Gasoline prices rose steadily for more than a year before peaking in June at an average of more than $5 a gallon, and U.S. drivers will spend up to $562 billion on gas this year — double what they spent on gas in 2020. Rising gas prices are being fueled by general inflation, as well as supply chain impacts from Russia’s invasion of Ukraine.

According to the Bureau of Labor Statistics, the cost of all goods and services in the US rose 8.5% year-over-year, and gas prices rose a whopping 44% over the same period. National pump prices fell to an average of $3.95 per gallon (regular unleaded), still well above $3.18 per gallon in August 2021.

The AAA report, released Aug. 11, projects an average fuel price of 17.99 cents per mile, or about $3.99 per gallon, based on the weighted average cost of gas for the first five months of 2022. Gasoline prices have continued to rise since the report was released (and remain volatile), and AAA said in a press release that the cost of owning a new car in 2022 could be higher than the report’s estimates.

Beautiful young Caucasian female customer chooses a new car, tries to check its parameters, tires, wheels, while the salesperson helps her choose it in the car dealership

Additional factors affecting costs

Fuel prices per mile vary greatly by vehicle type, of course, from 12.51 cents per mile for a small sedan to 24.63 cents for a half-ton pickup truck. Where you live also matters, with current average prices ranging from a low of $3.46 per gallon in Texas to $5.37 per gallon in California.

AAA ranked the 45 best-selling midsize cars in six categories. While insurance prices rose significantly in 2022, other ownership costs rose more modestly:

  • Depreciation: $3,900 per year ($3,656 in 2021).
  • Finances: $712 per year ($658 in 2021).
  • Fuel: 17.99 cents per mile (10.72 cents per mile in 2021).
  • Insurance: $1,588 per year ($1,342 in 2021).
  • License, registration and taxes: $675 per year ($669 in 2021).
  • Maintenance, repairs and tires: 9.68 cents per mile (9.55 cents per mile in 2021).

The average manufacturer’s suggested retail price — or MSRP — for a new car is $33,301 in 2022, up from $32,903 in 2021, according to AAA. The study assumed that the vehicles would be driven approximately 15,000 miles per year and would remain owned for five years.

How can I save money on owning a new car?

Drivers who prefer a new car to a used one can consider switching to an electric car or a hybrid car. AAA estimates that it will cost about $600 a year to charge an electric car, compared to $2,100 a year to fill up a gas tank. Of course, electric cars are often expensive, so make sure that the fuel economy is not outweighed by the overall cost of the car.

You can also download a gas additionsuch as GasBuddy or Upside to help you find the most affordable gas in your area.

Overall, a small gas-powered sedan has the cheapest cost of ownership at 54.56 cents per mile, compared to 60.32 cents for an electric vehicle and 64.61 cents for a hybrid, according to the AAA study. A half-ton pickup tops the list at 86.21 cents per mile.

You can also check for cheaper insurance rates. A 2017 NerdWallet Poll found that about 43% of insured drivers didn’t buy new insurance for at least a year, even though shopping around for better deals could save them up to $400 a year.

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