ORLANDO, Fla. — The average cost annual cost of owning a new vehicle has jumped to nearly $10,000, according to the latest data from AAA Inc.
According to AAA's 2021 annual cost study, the annual cost of new vehicle ownership is $9,666, or $805.50 per month.
The average annual cost of vehicle ownership in pre-pandemic 2019 was $9,282, or $773.50 a month.
AAA said the biggest factor in the increase is depreciation. With auto dealerships having low inventory as a result of the semi-conductor chip shortage, AAA said consumers should be aware of the costs and negotiate the best deal for their financial situation.
"Consumers have to remember the expense of owning a car goes far beyond the monthly payment," Greg Brannon, AAA's director of automotive engineering and industry relations, said. "We are seeing costs increase for a number of products recently, and cars are no exception. This trend will likely continue as new vehicles come equipped with the latest technology, which naturally drives up the sticker price."
The AAA study reviewed nine categories of vehicles, made up of 45 models, to determine the average annual operating and ownership costs of each.
Here are some of the factors that contribute to the costs:
- Depreciation. AAA said that remains the single biggest cost (40%) of new vehicle ownership.
- Fuel. On average, the cost of fuel is 10.72 cents per mile, based on data from May 2020 to May 2021. It does not account for the recent spikes in gas prices. Fuel costs vary widely by vehicle type, ranging from 3.66 cents per mile for electric vehicles to 15.81 cents per mile for pickup trucks.
- Maintenance, repair and tire costs. Maintenance and repair costs an average of 9.55 cents per mile. EVs are at the lower end of the cost range, at 7.70 cents per mile, while medium sedans are the most expensive at 10.43 cents per mile.
- Finance charges. Vehicle loan costs decreased due to a drop in the prime lending rate. The average interest rate in 2021 is 4.12%, or 1.056 percentage points lower than last year.
- Changing car buying habits. The AAA study found that buyers have moved away from previously popular categories such as sedans to newer models, such as compact SUVs.
In the study, AAA said it added two new categories: subcompact SUVs and midsize pickup trucks, which replaced large sedans and minivans, both of which AAA said no longer offer enough new models to be tracked.
AAA said the average cost today of a new 2021 vehicle is $1,502 (4.78%) higher than last year, which AAA attributed in large part to the addition of new models to the Your Driving Costs study.
Models in the small and medium sedan, medium SUV and hybrid categories averaged an increase in vehicle price of $3,064, led by hybrids as consumers opt for larger (more expensive) models in this category.
Pickup trucks increased $4,684 (an average of 11%), yet they remain the best-selling category of those included in the study.
AAA said consumers should understand all options available as well as individual needs before the purchase. The company offered these tips to consumers when purchasing a new vehicle:
- Research. With strains on inventory this year, consumers should do as much research as possible before beginning the buying process.
- Determine a budget. Determine what makes sense for your budget, including trade-in value and down payment amount.
- Buy or lease. Decide what is best, as well as whether to finance or lease. AAA said leasing makes sense for consumers who are early adopters of new technology, like to change cars often or don't put a lot of annual miles on a vehicle. Both options should be considered and consumers should select the one to best fit their needs.
- Length of the loan. Manufacturers and dealerships often offer extended loan terms as an incentive. These loans can be as long as 84 months with zero interest. AAA said this may be attractive since it lowers the monthly payment, but there comes a time when the vehicle will hold less value than what is owed, due to depreciation.
- New vs. used vehicles. New vehicles usually have longer warranties, buying incentives from the auto maker and the latest features. Consumers also have the option of certified pre-owned and used vehicles. Certified pre-owned usually means the 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. Consumers should test drive the vehicle model they want to purchase, driving it similarly to their daily driving route. AAA said consumers should test the car's ride quality and handling on different road surfaces: streets, hills, freeways and winding roads.
- Negotiate. AAA reminds consumers this can be done three times: Once for the vehicle, second for the trade-in value and third for the finance rate. AAA recommends negotiating each separately.
