AAA advises car buyers to budget for more than the monthly payment as car prices increase
According to the latest research from AAA, the average annual cost of new vehicle ownership is $9,666, or $805.50 per month. The biggest factor pushing the nearly $10,000 annual price tag is depreciation. It accounts for 40% of all ownership expenses outpacing additional costs like fuel and maintenance.
With low inventory at dealerships due to the semi-conductor chip shortage, AAA urges new car buyers to be aware of all the expenses associated with ownership so that they can negotiate the best deal for their budget.
“The expense of owning a car goes far beyond the monthly payment,” said Mark Jenkins, spokesman, AAA – The Auto Club Group. “Costs are increasing for a number of products, and cars are no exception. With strains on inventory this year, it is critical for consumers to do as much research as possible before beginning the buying process.”
Calculating Your Driving Costs
The 2021 AAA Your Driving Cost study reviewed nine categories of vehicles – consisting of 45 models – to determine the average annual operating and ownership costs of each. AAA selects top-selling, mid-priced models and compares them across six expense categories: fuel, maintenance/repair/tire costs, insurance, license/registration/taxes, depreciation and finance charges. Depreciation – a measure of how quickly a car loses value – remains the single biggest cost (40%) of new vehicle ownership.
Other key findings of this year’s Your Driving Costs include:
- Fuel costs. On average, fuel costs 10.72 cents per mile. This is based on data from May 2020 – May 2021, which does not include recent spikes in gas prices. Fuel costs vary widely by vehicle type, ranging from a low of 3.66 cents per mile for electric vehicles, to 15.81 cents per mile for pickup trucks.
- Maintenance, repair and tire costs. On average, maintenance and repair costs 9.55 cents per mile. Just like fuel, electric vehicles are on the lower end of the spectrum, costing 7.70 cents per mile, while medium sedans are the most expensive at 10.43 cents per mile.
- Finance charges. The cost of vehicle loans decreased due to a drop in the prime lending rate. The average interest rate in 2021 is 4.12%, which is 1.056 percentage points lower than last year.
As part of the Your Driving Costs study, AAA tracks changes in buying patterns and makes changes to the type of vehicle categories considered to match those trends. For several years now, buyers have moved away from previously popular categories like sedans to newer styles like compact SUVs. For 2021, AAA added two new categories: subcompact SUVs and midsize pickup trucks. These replaced large sedans and minivans, both of which no longer offer enough new models to be tracked.
Average Price for a New Vehicle
The average price of a new vehicle for 2021 is $32,903, which is $1,502 (4.78%) higher than last year, but is mostly due to the addition of new models to the Your Driving Costs study.
- Models in the small sedan, medium sedan, medium SUV and hybrid categories averaged an increase in vehicle price of $3,064, led by hybrids as consumers opt for larger (hence more expensive) models in this category.
- Pickup trucks saw an increase of $4,684 (an average of 11%); however, this has not affected their popularity, as they remain the best-selling category of those included in the study.
AAA’s Car Buying Advice
Buying a car is the second biggest purchase behind a home that most people will make in their lifetime. Understanding all of the options available as well as individual needs can ease some of the anxiety associated with purchasing a car.
AAA offers the following guidance when it comes to shopping for your next vehicle:
- Determine what makes sense for your budget including trade-in value and down payment amount.
- Consider whether to finance or lease. For someone who is an early adopter of new technology, likes to change cars often or doesn’t put a lot of annual miles on a vehicle, leasing may make more sense. Consumers should evaluate both options and pick the one that will best suit long-term needs.
- Understand the details of the loan. Manufacturers and dealerships sometimes offer extended loan terms as an incentive to buyers. In some cases, these loans can be as long as 84 months with interest as low as zero. Initially, a loan like this may be attractive since it helps lower the monthly payment. However, understand that with long-term loans comes a period of time when the vehicle will hold less value than what is owed due to depreciation.
- Look at pricing options for both new and slightly used vehicles. New vehicles typically come with longer warranties, buying incentives from the automaker, the latest features and are widely available. When it comes to used vehicles – there are two types to choose from – certified pre-owned and used. The advantage of a certified pre-owned vehicle is the original owner has absorbed the majority of the depreciation cost, while the vehicle still has quite a few of the latest features and a manufacturer’s warranty.
- Test drive the exact model of the car you want to purchase. If possible, they should pick a route that mirrors their daily driving routine. It is a good idea to test the car’s ride quality and handling on a number of different road surfaces: city streets, hills, freeways and winding roads.
- The most important thing to remember is in most cases, there are three separate negotiations that occur when purchasing a car: the price of the new vehicle, trade-in value and finance rate if applicable. Consumer should take their time and negotiate them individually.
Car Buying Resources
- Consumers can calculate their annual driving cost through AAA’s digital brochure on Newsroom.AAA.com.
- AAA offers a number of resources consumers can use while car shopping including the AAA Car Guide and AAA’s car buying program.
Maintaining the Vehicle you Have
"In the current market, it can be challenging to find the specific vehicle you’re looking for," Jenkins continued. "If you’d rather try to wait out the shortage, it’s best to ensure your vehicle is properly maintained. Routine oil changes and other vehicle inspections will help extend the life of your vehicle."
- Find the nearest AAA Approved Auto Repair Facility by visiting AAA.com/AutoRepair
- Car owners can also use AAA’s web tool to determine the estimated cost for routine maintenance or a more involved repair at AAA.com/AutoRepair/Estimate
About AAA - The Auto Club Group
The Auto Club Group (ACG) is the second largest AAA club in North America with more than 14 million members across 14 U.S. states, the province of Quebec and two U.S. territories. ACG and its affiliates provide members with roadside assistance, insurance products, banking and financial services, travel offerings and more. ACG belongs to the national AAA federation with more than 62 million members in the United States and Canada. AAA’s mission is to protect and advance freedom of mobility and improve traffic safety. For more information, get the AAA Mobile app, visit AAA.com, and follow us on Facebook, Twitter and LinkedIn.