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A vehicle is a necessity for most Americans. Unless you live in an area that has a strong public transportation system, your vehicle likely helps you navigate your daily life. But in a time of decades-high inflation, do you know how much your car is really costing you? Bankrate delves into the true cost of car ownership to help you understand how your ride affects your bottom line.

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What is the average cost of owning a car?

The cost of buying a new or used car has increased substantially due to inflation and supply chain issues. Kelley Blue Book reports that a used car cost an average of $28,012 in June 2022, and that new cars cost an average of $48,043. These prices are enough to cause many consumers to cringe, but the sticker price of a vehicle is only the first in a long line of expenses when you own a vehicle.

The cost of owning a car also includes insurance, gas, maintenance costs and more. According to a study by AAA, the total cost of owning a new vehicle in 2021 is $9,666, which is in addition to the vehicle’s purchase price. Keep in mind, though, that 2021 hadn’t yet seen the scorching inflation that has gripped the nation in 2022. The Bureau of Labor Statistics (BLS) reports an increase of 9.5 percent on all transportation costs (except gas) between June 2021 and June 2022. It’s likely that the cost of owning a car is significantly higher in 2022 than it was in 2021.

Costs associated with car ownership

Some car ownership costs are more apparent than others, but there may be ways to minimize these costs. If you’re buying your first car or just want a refresher on what car ownership entails, here are some things to consider.


The average cost of full coverage car insurance in 2022 is $1,771 per year, although your premium will vary based on the type of vehicle you drive, your driving history, the insurance company you choose, and the types and levels of coverage you purchase. Safe driving can dramatically lower the cost of car insurance, as it can shield you from surcharges. It’s also important to select the right amount of coverage for you. Speaking with an insurance expert can help you maximize your car insurance coverage value.


Monthly loan payments for new cars jumped to an average of $667, while used vehicle loans average $515 per month, according to Experian. Unsurprisingly, these amounts have increased to keep pace with inflation. Buying a used vehicle in good condition might reduce your auto loan payment and future maintenance costs.


Gas prices have been continually in the news lately, and for good reason. After the national average peaked at just over $5.00 per gallon in mid-June, the national average sits at $4.30 per gallon as of July 27, according to the auto club AAA. Some states are still dealing with far higher prices, though. California drivers pay the most, with an average of $5.69 per gallon, down from the mid-June high of $6.44 per gallon. Make sure to think about your commute when you factor in gas prices; the more you drive, the more you’ll pay at the pump.


Registration fees vary from state to state. You can check out vehicle registration fees in every state from the National Conference of State Legislatures.


The price of routine maintenance, repairs and tires was 9.55 cents per mile in 2021, according to AAA, and the average annual cost of auto repairs in the U.S. is $1,425. However, the BLS reported a 7.9 percent increase in overall vehicle maintenance cost between June 2021 and June 2022, so it’s likely to cost more to maintain and repair your vehicle now than it did last year. The cost of maintaining a car is closely related to the amount of time spent driving, so driving less may reduce these costs by reducing wear and tear.


Depreciation isn’t actually a ‘cost,’ but it is something to keep in mind, as your car’s value will decrease as soon as you drive it off the lot. A car’s depreciation varies widely. In 2021, the average annual cost of depreciation is $3,900, according to AAA. Brand-new vehicles lose their value fast, so buying used and keeping the car in good shape could help lower your car’s depreciation rate.

How to save on car ownership

Although the cost of car ownership can be steep, owners can take steps to keep expenses in check:

  • Shop for cheaper car insurance: Some insurance companies are known for offering cheaper rates than others, so getting and comparing quotes from multiple providers may be a smart move.
  • Refinance your car loan: Some car loans can be refinanced at a lower rate. It may be wise to check and see if there’s a lower rate available, especially if the market has changed since the vehicle was purchased. With interest rates rising quickly, it might be a good time to consider this step.
  • Consolidate driving trips: The more you drive your car, the more maintenance it will generally require. It may be a good idea to consolidate errands in one trip, carpool with friends and neighbors, and research alternative local public transportation options. Driving less might also mean lower car insurance costs, especially if you participate in a telematics program.
  • Maintain your car: When it comes to vehicle repair costs, the best defense is a good offense. Having routine maintenance done may help prevent higher repair costs down the road. Early detection of issues can often bring repair costs down.

When is it time to replace a car?

Vehicles don’t last forever, which means at some point you will need to replace yours. Over time, maintenance can become unmanageable or the car might no longer be a good fit for your lifestyle. Here are a few situations to consider when thinking about whether or not it’s time to replace a car.

Family changes

Families may grow with time, and your ideal vehicle may need to change as your family changes. For example, a larger vehicle may be needed to accommodate car seats.

Pros Cons
Larger cars have more room.
Newer models have modern safety features.
Larger cars typically get lower gas mileage.
Buying a new car means taking on more financial responsibility.

Continued maintenance issues

Once a car has been used for many years, it may require more frequent maintenance. If a vehicle is constantly taken to the repair shop, it might be time for a new ride. You can even do a bit of math to see if the cost to maintain your current vehicle is outweighing the cost to get a different one.

Pros Cons
New cars usually require less maintenance.
More recent models may be less likely to break down.
New cars can tie up discretionary spending for years.
Newer models might have computer components that require special or more expensive maintenance.

Totaled vehicle

If your vehicle has been in an accident, has been totaled due to a natural disaster or was stolen, buying a new or new-to-you car may be inevitable. You can use the opportunity to shop around and find a vehicle that fits your current needs and budget.

Pros Cons
Depending on your coverage and the details of the accident, you may get an insurance payout for your totaled vehicle.
Even totaled vehicles can be sold for scrap, which may help if you don’t get an insurance payout.
Depending on your coverage and the type of car you want to buy, your claim payout may not cover the full cost.
If you decide to keep your totaled vehicle, the value usually decreases more than normal, even if it’s restored to working condition.

Fuel efficiency

Alternative energy and new technology have dramatically increased the fuel efficiency of modern cars. Those looking for a car that won’t use a lot of gas (or any at all) can find plenty of hybrid and electric vehicles on the market, and they’re becoming more affordable every year.

Pros Cons
Fuel costs could go down or be eliminated.
Fuel-efficient vehicles have a smaller carbon footprint.
Fuel-efficient cars can be more expensive to purchase than their gas-powered counterparts.
Maintenance for hybrid and electric vehicles is often specialized and could be pricey.

Budget changes

If your budget has recently changed, your vehicle might not fit your new needs. For example, perhaps you’ve taken a lower-paying job and are struggling to afford your car payment. Or maybe it’s the opposite: you’re making more money and you can finally afford your dream car.

Pros Cons
You may be able to find a lower-priced vehicle if your budget has become tighter.
Aligning your vehicle costs with your budget allows for greater financial peace of mind.
You will need to adjust your monthly budget to take a new payment amount into consideration.
You may not get as much for your prior vehicle as you want, since it has depreciated and you have to pay off the balance on your outstanding loan.

Frequently asked questions