In the United States, the car was always considered a symbol of freedom, as it enabled its owner to travel from one location to another as per his own inclination. When cars were mass-produced in the Golden Eras of the 50s and 60s, owning a car was affordable even to low-income individuals. Although the car was still considered a luxury asset, the common American man could afford most of the expenses.
Heading into the 21st century, a lot of additional factors come into consideration while owning a car, making it much more expensive than before. With all the additional maintenance, insurance, and average gas costs per year, owning your favorite Kia Seltos might end up burning a hole in your pocket.
Estimates from the AAA research agency
The American Automobile Association (AAA) has been conducting research on automobile costs since 1950 and provides an accurate compilation of results every time it releases a report. This time around, AAA estimates the average price of a new car at nearly $40000 in the current situation. Based on further calculations, AAA also estimates that the average yearly costs an owner spends on a vehicle are approximately $9,282, which equates to an average of $$773.50 a month. This is a substantial increase over the $8849 ownership costs per year which was recorded last year.
The Bureau of Labor Statistics estimates that the average man earns a median salary of $52,208 per year, while a woman earns around $41,912. Based on these numbers, splurging money on acquiring a new car doesn’t seem to be the most economical decision. Besides, the majority of Americans today are splashing their cash on larger trucks and SUVs rather than smaller and more affordable cars. This is probably the driving force towards rising car ownership costs.
Trucks and SUVs are the most expensive vehicles to maintain and insure compared to any other type of car. Each car segment has its share of different expenses involved. Generally speaking, pickups are the most expensive vehicles to own, averaging annual costs of $10839. On the other hand, small sedans cost $7114 to maintain per year. These estimates don’t include the cost of parking.
Rising financial expenses associated with the modern car
The financial costs involved with owning a car are constantly rising owing to the rising interest rates and longer loan and lease periods. Currently, every car owner has to account for average finance charges of $920 per month, an increase from $744 back in 2018.
John Nielsen, AAA’s managing director for Automotive Engineering & Repair, said that financing charges accounted for more than 40% of the total increase in average vehicle ownership costs. He also said that AAA discovered a spike in finance costs over the past 12 months, and these costs were more than any other expense associated with the vehicle.
Through AAA’s extensive research on car ownership costs, every American gets an idea that car ownership requires long-term planning, much like home, education, and kids. The car’s overall expenses go way beyond the car’s dealership selling price. To cut down on expenses, used cars are always a great option. As per various portals, the average new car price is $40,000, while the average used car price sits at $20,000.
For a new car, there are always high costs of financing involved owing to its higher base price. Also counting the greater auto insurance costs and maintenance expenses, owning a new car may not be a piece of cake for everyone. Also take into account the warranty period, cause once it runs out you might have to shell out a lot of bucks to repair the advanced technology on your newer vehicles.
The dreadful depreciation
Depreciation is a scary word that almost everyone hates, and yet everyone has to accept its reality. The term depreciation applies to any item we buy within seconds of purchase, including boats, furniture, and computers. However, cars are always the worst hit when it comes to overall depreciation.
For example, if you buy a new car at $30,000 today, when you sell it 3 years later, you only get a selling price of $15,000. On the contrary, if you buy the same car that is 3 years old at a $15,000 price tag, you avoid losing out on $15,000 due to depreciation.
How to cut down your car expenses
Although owning a car requires you to spend thousands of bucks every year, it isn’t practical for most people to avoid cars as their daily means of transportation. There are some steps you could undertake to push your overall car expenses on a downward trajectory. To begin with, if you don’t drive around too much, leasing a car instead of buying it might be the best option for you.
Further, if you can get to your daily workplace or any other destination by public transportation, you should take the initiative and hop into a bus or transit. Regularly using public transportation can have a significant impact on lowering your monthly transportation expenditures.
If you don’t like to travel in public, carpooling is another great option. Carpooling with a friend in turns can save you a lot of money in fuel expenses and can reduce the wear and tear of your vehicle, thus brushing off the maintenance costs. If your locality doesn’t have access to public transportation, it might be wise to reconsider your type of car.
A small sedan can get you around the neighborhood in a more cost-efficient way than your fuel-sipping SUV. Driving a small vehicle amounts to 44% more savings per year than an SUV or truck.
Likewise, don’t opt for that 8-cylinder engine just because it packs in more power and punch. If you can just get your work done with a 4-cylinder variant, you should be getting that instead to save up on the additional gasoline costs. The 8-cylinder variant is practical only for those who haul heavy loads.
On a final note, you can undertake some steps on your personal level to drive less frequently. Walk or cycle to your nearby local destinations to boost your personal health and budget. If you do take your car out, make sure to get all your work done in a single round trip.