Published 12:01 AM EDT Sep 12, 2019
The average cost of owning a new vehicle reached an all-time high this year as financing costs jumped.
AAA’s annual cost-of-car-ownership study, released Thursday, found that a 24% increase in average financing costs on new cars contributed to a 4.9% overall increase in the expense of owning a new vehicle.
Altogether, it costs the average American about $9,282 per year, or $773.50 per month, to own a new vehicle when factoring in fuel, maintenance, depreciation, insurance and borrowing costs, according to AAA. That’s up from $8,849 in 2018.
The average buyer pays $920 in annual financing costs alone – namely, loan interest – which is up from $744 in 2018. That increase came in part from longer loan terms and higher vehicle prices.
The average amount borrowed per new vehicle purchased in August was $32,590, up 5.2% from a year earlier, according to car-buying advice site Edmunds. The average interest rate was 5.8%, the same as a year earlier, but average loan terms went from 68.6 months to 69.6 months.
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Vehicle depreciation is the most significant factor in the average cost of owning a new vehicle, according to AAA. The average vehicle will depreciate by $3,334 in 2019.
Vehicle costs vary widely, depending on the model. In general, the smaller a car, the less expensive it is.
The average cost of a small sedan was $7,114, compared with $10,839 for a pickup.
The nation’s SUV boom played a role in driving costs higher. SUVs, which are more expensive than cars, account for about seven in 10 new vehicle purchases, according to industry analysts.
“It’s definitely pulled (the average) up because those vehicles are more expensive to own and operate,” said Mike Calkins, principal author of the study for AAA. “Pickup trucks are really big right now, and those are the most expensive vehicle to own and operate by a good margin.”
Cost-conscious consumers should hold off and buy a used car that’s one to three years old, he said.
“Someone else is eating that $5,000, $6,000 in depreciation that happens in the first few years,” but “you’re still getting a vehicle that’s under warranty,” he said.
Another way to save: Buy an electric car, preferably lightly used, Calkins advised.
Of all vehicle categories measured by AAA, electric cars were easily the cheapest to operate at 10.25 cents per mile. Hybrids were next cheapest at 13.46 cents per mile. In comparison, a medium SUV was 22.8 cents, while a medium sedan was 18.45 cents.
Electric cars and hybrids are generally more expensive when purchased new, but they depreciate very quickly, have low fuel costs and have lower maintenance costs, according to AAA.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.