Car ownership costs include your monthly payment, insurance ($1,694/year), fuel ($1,950/year for gas cars), maintenance ($1,468/year), registration fees, and depreciation. The biggest expense is often depreciation, which averages $4,334 annually. You can reduce these costs by comparing insurance rates, practicing fuel-efficient driving, doing basic maintenance yourself, and choosing the right vehicle type for your needs.
Your car costs more than you think. The average driver now spends $11,577 per year just to keep their vehicle running. That breaks down to $965 each month. Gas, insurance, repairs, and hidden fees stack up faster than most people realize. This guide shows you exactly where your money goes and how to keep more of it in your pocket.
What Makes Up Car Ownership Costs
You pay for your car in two ways. Operating costs happen when you drive. Ownership costs happen whether you drive or not.
Operating costs include fuel, maintenance, and repairs. These change based on how much you drive. If you rack up 20,000 miles per year, you pay more than someone driving 10,000 miles.
Ownership costs are fixed. Insurance, loan payments, registration, and depreciation hit your wallet every month. You pay these even if your car sits in the driveway.
1. Purchase and Finance
Your monthly payment is just the start. The average new car payment is $749 per month. Used cars cost $529 monthly. But financing adds thousands in interest over the loan term.
A 60-month loan at 9% APR means you pay $1,131 per year just in interest. Stretch that loan to 72 or 84 months and watch the interest costs multiply. Before you even buy a car, finding the best deals can significantly lower your long-term costs.
2. Fuel and Charging
Gas prices swing wildly. Right now, the national average sits at $3.50 per gallon. If your car gets 25 miles per gallon and you drive 15,000 miles yearly, you spend $2,100 on fuel.
Electric vehicles cost less to fuel. Charging at home runs $10 to $20 for a full battery. Public fast chargers vary more. Anything under $0.45 per kilowatt-hour counts as a good deal.
3. Repairs and Maintenance
Regular upkeep costs 10 cents per mile. That adds up to $1,468 per year for most drivers. New cars need less work thanks to warranties. Used cars demand more attention and bigger repair bills.
Oil changes, tire rotations, and brake pads are predictable. Transmission failures and engine problems are not. You can cut repair bills by following simple maintenance tips that protect your car from avoidable damage.
4. Insurance and Registration
Full coverage insurance averages $1,694 per year. Your rate depends on your age, driving record, credit score, and location. Young drivers pay more. Clean records pay less.
Registration fees vary by state. Some charge based on vehicle value. Others use flat fees or weight-based calculations. Factor in parking permits if you work downtown.
How to Lower Day-to-Day Running Costs
Small changes in how you drive and fuel up add to big savings over time.
1. Smarter Driving Habits
Aggressive driving wastes gas. Every time you slam the brakes or punch the accelerator, you burn extra fuel. Smooth acceleration and gentle braking improve fuel economy by up to 33% on highways.
Keep your tires properly inflated. Under-inflated tires drop your gas mileage by 3%. Check tire pressure monthly. Most gas stations have free air pumps.
Remove excess weight from your trunk. Every 100 pounds reduces fuel economy by 1%. Clean out that storage bin you never use.
2. Fuel-Saving Strategies
Use gas apps to find the cheapest stations near you. GasBuddy and Waze show real-time prices. The difference between stations can be 20 cents per gallon or more.
Fill up on Tuesdays or Wednesdays. Prices typically rise before weekends. Avoid topping off your tank. It wastes money and harms the environment.
Pay with cash if stations offer discounts. Some places charge 5 to 10 cents less per gallon for cash purchases.
3. Electricity Costs for EVs
Charge at home during off-peak hours. Many utilities offer cheaper rates at night. This cuts your cost per kilowatt-hour significantly.
Avoid public fast chargers unless necessary. They cost 2 to 3 times more than home charging. Plan your trips to charge at home whenever possible.
Reduce Maintenance and Repair Bills
Preventive care stops small problems from becoming expensive disasters.
1. Preventive Checks
Check your oil level monthly. Low oil damages your engine and leads to costly repairs. Most cars have dipsticks that make this quick and easy.
Replace air filters regularly. Clean filters improve gas mileage and engine performance. You can do this yourself in 5 minutes for under $20.
Rotate your tires every 5,000 to 7,000 miles. This extends tire life and prevents uneven wear. Many shops do this free with an oil change.
Watch for warning lights. That check engine light means something. Ignoring it turns minor issues into major expenses.
2. DIY Basics vs Mechanic Jobs
Learn simple tasks you can do yourself. Changing wiper blades, replacing batteries, and swapping air filters need no special tools. YouTube videos walk you through each step.
Know when to call a professional. Brake work, transmission issues, and electrical problems require expertise. Trying to fix these yourself can make things worse.
Get multiple quotes for big repairs. Prices vary widely between shops. Independent mechanics often charge less than dealerships for the same work.
Save on Insurance and Annual Fees
Insurance is your second-biggest car expense after depreciation. You have more control over this cost than you think.
1. Compare Policies
Shop around every year. Insurance rates change constantly. You might find the same coverage for $500 less with a different company.
Bundle your car and home insurance. Most insurers offer discounts when you combine policies. This can save 15% to 25% on premiums.
Ask about every discount. Good student, military, low mileage, and safe driver discounts add up. Some companies offer paperless billing discounts too.
2. Deductibles and Coverage Needs
Raise your deductible to lower premiums. Going from a $500 to $1,000 deductible can cut your payment by 10% to 15%. Just make sure you can afford the higher deductible if you file a claim.
Drop collision and comprehensive on older cars. If your car is worth less than 10 times your annual premium, these coverages might not make sense.
Review your coverage limits. You might be paying for more protection than you need. But never skimp on liability coverage. That protects your assets if you cause an accident.
Long-Term Strategies to Keep Costs Low
Think beyond next month. Smart long-term planning saves thousands over your car’s lifetime.
1. Depreciation Control
Buy used instead of new. New cars lose 20% of their value in the first year. Let someone else take that hit.
Choose models that hold value well. Research resale values before buying. Some brands depreciate much slower than others.
Keep your car clean and maintained. Good condition means better resale value. Regular washing prevents rust. Proper maintenance proves you cared for the vehicle.
2. When Repairs Become Too Costly
Calculate the repair-to-value ratio. If a single repair costs more than half your car’s value, consider replacement.
Track your repair frequency. When you visit the mechanic monthly, those bills exceed new car payments.
Consider total annual repair costs. If you spend more than $3,000 yearly on repairs, a newer car might cost less overall.
Is Switching to an EV Cheaper?
Electric vehicles change the math on car ownership costs.
1. Upfront vs Lifetime Costs
EVs cost more to buy. The average electric vehicle runs $10,000 to $15,000 higher than comparable gas cars. Federal tax credits up to $7,500 help offset this.
Maintenance costs drop dramatically. EVs have fewer moving parts. No oil changes, transmission work, or exhaust system repairs. Annual maintenance averages $500 to $700 less than gas cars.
Insurance runs slightly higher for EVs. The advanced technology and expensive batteries increase premiums by 10% to 20%.
2. Charging vs Fuel Comparison
Home charging beats gas every time. At average electricity rates, you pay $10 to $20 for 300 miles of range. The same distance in a gas car costs $35 to $45.
Public charging narrows the gap. Fast chargers can cost as much as gas when you factor in time and convenience fees.
Your savings depend on driving patterns. Commuters who charge at home see the biggest benefits. Road warriors using public chargers save less.
Conclusion
Owning a car costs an average of $11,577 per year, but smart choices can reduce that significantly. Focus on the big three: compare insurance rates annually, practice fuel-efficient driving, and stay on top of preventive maintenance. Buy used to avoid massive depreciation, learn basic DIY repairs, and track your actual expenses to spot where money disappears.
Your next step is simple. Calculate your own car ownership costs using your actual numbers. Add up insurance, fuel, maintenance, and payments for the past year. Compare that to your income. If car expenses exceed 15% to 20% of your take-home pay, use the strategies in this guide to cut costs.
FAQs
How much does it really cost to own a car per month?
The average monthly cost is $965, including payments, insurance, fuel, and maintenance. Your actual costs depend on your car type, driving habits, and location. Track your expenses for three months to see your real number.
What’s the cheapest way to own a vehicle?
Buy a 2-3 year old used car with low mileage, keep it for 10+ years, do basic maintenance yourself, and shop insurance rates annually. This avoids depreciation hits and minimizes financing costs.
Should I buy or lease a car to save money?
Buying saves more long-term. Leasing means lower monthly payments but you never build equity. You pay for the car’s depreciation plus fees, then hand it back with nothing to show.
How can I tell if my car is costing too much?
Add up all car expenses for the year. If they exceed 20% of your gross income or if repairs cost more than half your car’s value, it’s time to reassess. Monthly mechanic visits are another red flag.
Do electric cars actually save money?
Yes, but only after 5-7 years. Higher purchase prices are offset by lower fuel and maintenance costs. If you drive 15,000+ miles yearly and charge at home, EVs save $500 to $1,000 annually after the break-even point.
