Car payments aren't all there's to owning a car.
Auto Ownership Costs Beyond Monthly Payments
Most many assume the total cost of car ownership is simply the monthly payment. It's not. It's everything else too. In fact, nearly half of American drivers cite the sky-high expenses associated with car ownership as the reason they can't save money, according to a recent report by Streetsblog USA.
The cost of owning a car goes far beyond what you pay to buy it. You also have to pay for gas, insurance, maintenance - and repairs. And if you neglect even a few hundred miles on a recommended service interval, you can end up with expensive repairs or breakdowns later. According to Cox Automotive, consumers now spend an average of $838 fixing their cars.
So how much does owning a car really cost? According to AAA's 2025 Your Driving Costs study, the average cost of owning a car is $11,577 annually or $965 monthly. That's no shortage of money - especially considering that the average American is spending 20 percent of her monthly income on auto loans, fuel, insurance, and maintenance. That's roughly twice what financial experts recommend for transportation costs.
But it's not just the monthly payments and routine maintenance that add up. Cars are complex machines, and as they age - their maintenance and repair expenses go up. An oil change, for example, typically costs between $35 and $75, but a major repair can easily run into the thousands of dollars.
Transportation Expenses Are Among the Highest Annual Consumer Expenditures
Transportation is one of the highest annual consumer expenditures. According to ITDP, transportation costs totaled $12 -295 annually as of 2023. That's a significant chunk of change, and it's only going to get worse as urban congestion worsens.
In Australia, for example, total passenger travel has risen ten-fold over the past seven decades, with 87% of this increase attributed to private road vehicles. In Melbourne alone, the avoidable social cost of congestion was A$4.6 billion in 2015and it's forecast to more than double by 2030.
And while the cost of car ownership is rising, so is the number of vehicles on the road. While over 90% of American households had at least one vehicle in 2021, nearly a quarter of US households had three or more vehicles.
Financing a Car Can Add Up
If you're financing a car, the monthly payments can be substantial. According to Experian, the average monthly payment on a new car was $738 in the fourth quarter of 2023. And as of the first half of 2023, 80 percent of new and 38 percent of used vehicle sales were financed with either a loan or a lease.
While financing can make it easier to afford a car, it can also add up quickly. If you're paying interest on a loan or lease, you'll end up paying more than the sticker price of the car over time.
Consider the Total Cost of Ownership Before Buying a Car
Before buying a car, consider the total cost of ownership. This includes the purchase price - financing costs, insurance, fuel, maintenance, and repairs. Don't just focus on the monthly payment. Look at the big picture.
If you're looking to reduce your transportation costs - consider alternatives to car ownership. Public transportation, biking, walking, and carpooling can be cheaper and healthier options. And if you do own a car, make sure to keep up with routine maintenance to avoid costly repairs down the road.
References
- American drivers cite the sky - usa.streetsblog.org
- $838 - kbb.com
- $11 -577 - nerdwallet.com
- $12,295 - itdp.org
- total passenger travel has risen - pmc.ncbi.nlm.nih.gov
