What it REALLY Costs to Own a Car

Car ownership comes with a bigger price tag than what you pay, as there are many hidden costs. So how much does it cost to own a car? Learn the truth here.

how much does it cost to own a car

According to AAA, it costs an average of $8,469 to operate the average car for 2017, or about $706 per month. Does that sound about right, or do you think that’s way off? If you think your costs are different, just remember that it’s an average. Each type of car will have its own operating costs.

How Most of Us View What it Costs to Own a Car

I suspect most people don’t give serious thought to what it actually costs to own a car. After all, a car is a necessity, particularly if you live in a suburban or rural area with little public transportation available.

So most of us tend to view the cost of owning a car as simply the monthly payment on our lease or car loan. On deeper reflection, we might also throw in gasoline and insurance. And as far as major repairs, we might try to ignore those completely. When you add too many components to the car expense calculation, the number gets to be a little bit scary. But that’s exactly what AAA attempts to do.

If the AAA numbers are right, and it costs an average of $706 per month to own a car. That’s about half the average house payment. And if you have two cars costing you over $1,400 per month, that’s probably pretty close to your house payment. If you live in a low-cost area, it might even be higher. That’s because the cost of operating a car doesn’t vary materially based on where you live.

For fun: The 10 Most Expensive Cars in the World

How AAA Counts the Cost of Owning a Car

In estimating the average annual cost to own a car, AAA goes into more detail than you or I would. They break down individual expenses in coming up with the total.

Those component expenses are as follows:


This is an expense that AAA includes, but that most car owners completely ignore. But it’s a well-known fact that cars depreciate. In fact, according to Carfax.com, the average car loses 10% of its value soon as soon as you drive it off the lot and an additional 10% each year thereafter.

A further estimate indicates the average new car will lose 60% of its value within the first five years of ownership.

We tend not to think of depreciation as a “real expense” because it doesn’t have an actual out-of-pocket dollar cost. At least, not until we go to sell or trade in the vehicle. At that point, the impact of depreciation becomes only too obvious.

AAA estimates that depreciation looks like this, based on the type of vehicle that you drive:

  • Small sedans–$2,114
  • Small SUVs–$2,840
  • Minivans–$3,839
  • Electric vehicles–$5,704

Of course, the price you pay for a vehicle affects the amount of depreciation expense. The higher the price, the greater the depreciation dollar amount in any given year. But it’s also a fact that depreciation becomes less of a factor with vehicles that are more than five years old. It’s not that they stop depreciating, but rather that they depreciate at a much slower rate. So buying an older car will get you out of some of this expense.


Maintenance, repairs and tires

AAA estimates these at $1,186 per year. Once again, that will vary considerably. For example, it will be much higher on higher-end cars that require premium replacement parts. And unlike with depreciation, older cars are more likely to lose in this category. The older a vehicle, the more likely it is to need expensive ongoing repairs to keep it running.


I think it’s safe to say that most of us try to ignore this expense, which is not hard to do given that we pay it out in small amounts over the course of the year. But it does add up. AAA estimates this cost at $1,500 per year. This number, again, is highly variable. If you have a fuel-efficient subcompact, that number will naturally be lower. But if you have a light truck, SUV, or luxury car, it can be considerably higher.

AAA’s estimates are based on an average of 15,000 miles driven per year. Your fuel consumption will be higher or lower, to the degree that you vary from that average mileage number.


This is the only expense where geography plays a major role. AAA estimates this expense at $1,029 as an average. According to Insure.com, the cost of car insurance ranges from a low of $864 per year in Maine, to a high of $2,394 in Michigan. That’s a wide variation, which makes it impossible to generalize on this expense.


License, Registration and Taxes

This includes the cost of all government taxes and fees payable on purchase, plus annual fees. AAA estimates these costs to be $636 per year for a medium-sized sedan. Again, though, you’ll see plenty of variation here. The size of your vehicle, age of your vehicle, and local tax laws all come into play.

Finance costs

These costs are calculated based on a five-year loan in the purchase of a new vehicle with 10% down at the national average interest rate. The estimate is $597 per year for a medium-sized sedan.

Different Vehicles, Different Average Car Expenses

One of the factors that make it very difficult to come up with an average annual cost of operating a car is that there are wide differences based on the type of vehicle. For example, even though the total average annual cost is $8,469, it will cost just $6,354 to operate a small sedan for one year. At the opposite end of the spectrum, it will cost $10,054 to operate a pickup truck.

AAA summarizes annual costs based on vehicle type as follows (all figures are based on an average of 15,000 miles driven per year):

Vehicle TypeAnnual CostVehicle TypeAnnual Cost
Small Sedan$6,354Minivan$9,146
Small SUV$7,606Large Sedan$9,399
Hybrid$7,687Medium SUV$9,451
Medium Sedan$8,171Pickup Truck$10,054
Electric Vehicle$8,439AVERAGE$8,469

New Versus Used Cars

The above figures represent the cost of ownership for a vehicle purchased new. And the costs have been averaged over the first five years of ownership. It is likely that the cost to own a car will be somewhat lower if you’re purchasing a used vehicle.

For example, if you purchase a five-year-old car, much of the depreciation will already be gone. The annual depreciation expense will be significantly lower. Car insurance is often also less expensive, particularly if you’re able to drop coverage for collision and comprehensive. And if you are able to pay cash for the vehicle, financing costs will disappear.

However, the catch on used cars is repairs, maintenance and tires. The older the vehicle is, the more expensive these will be. For example, while AAA’s estimate of $1,186 maybe reliable for a moderately priced newer vehicle, the cost of maintaining an older car may be double or even triple that number.

Fuel may also be higher with secondhand cars. As parts begin to age in a vehicle, they become less fuel-efficient.

However, even adjusting for all of the variations between new and used cars, it’s likely that the cost of keeping a used car will be fairly close to a new vehicle.

So there you have it–the average cost of keeping your car is about $8,500 per year. Do you think that’s accurate? And what does it imply for households that have two or three cars?

Topics: cars

Leave a Reply