The cost of owning a new car has grown 5% in the past year, according to the 2021 AAA Your Driving Costs study. Costs increased across all categories, bringing the average spend to $ 9,282 per year, or $ 773.50 per month.
AAA reviewed 45 top-selling sedans and SUVs, considering six expense categories: fuel, maintenance, full insurance, license / registration / taxes, depreciation, and finance costs.
The main driver of the increase was longer loan terms, combined with higher purchase prices, AAA reported. According to the study, consumers paid 24% more interest on new auto loans this year, at least in part because more borrowers chose 72- or even 84-month loans. AAA estimates that the total finance charge increases by $ 1,000 for every 12 months that a loan is extended.
Additionally, AAA has found that:
- Average insurance costs have increased by $ 5.
- Buyers paid an additional $ 14 in licenses, registration and taxes.
- Depreciation rates have slowed down, so cars have retained their value.
- Smaller, fuel-efficient cars are the cheapest to own at $ 7,114.
- Half-ton pickups are the most expensive to own at $ 10,839.
The current market – where few new cars are available and the price of used cars has risen significantly – means relief anytime soon.
“With vehicle inventories stretched, it’s critical that buyers do their research first or even wait until prices come down. Understanding your options ahead of time can save you thousands of dollars a year, ”said Greg Brannon, director of automotive engineering and industrial relations for AAA, in an email.
Just focusing on paying for the car and ignoring the extra costs could wreak havoc on your budget.
If you need to buy a new car now, Aim to spend less than 10% of your take home pay on your monthly payment and less than 15% to 20% on overall car expenses. Adding 10% to the advertised price of the car you are considering will help you avoid sticker shock when you see those inevitable extra expenses.
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Dawnielle Robinson-Walker writes for NerdWallet. Email: [email protected]
The article The costs of owning a new car are rising originally appeared on NerdWallet.