Calculating the total cost of owning your car — or one you might buy soon — is the best way to make sure your auto budget is in line. But with many different factors contributing to the cost of car ownership, it can be difficult to know exactly how much your car is costing you.
Here’s what you need to know about the cost of owning a car, including the average monthly payment, common ownership costs and how to go about saving money while still driving a car you love.
Average monthly cost
The average monthly payment on a new car was $735 in the 1st quarter of 2024, according to credit reporting agency Experian. Leasing a new car was cheaper at $595 a month, and owning a used car was the cheapest option, with an average monthly payment of $523. Regardless of your choice, you’re still likely to be paying over $500 a month whether you finance or lease a vehicle.
But that’s far from the true cost to own a car.
When you take into account loan interest, depreciation, fuel, insurance, maintenance and fees, the cost of owning a car makes a big leap. For new vehicles driven 15,000 miles a year, average car ownership costs were $12,182 a year, or $1,015 a month, in 2023, according to AAA.
Common costs of owning a car
Regardless of the car you drive, you’re likely to have to pay for these items on a regular basis.
Fuel
With prices changing almost daily, fuel is one of the most variable costs of driving a car. According to AAA, the average driver paid around 15.93 cents a mile for regular unleaded gas in early 2023. Over a 15,000-mile year, that’s $2,390 annually just in gas. AAA based electric vehicle charging costs on a rate of 15.8 cents per kilowatt hour.
The good news is that average fuel costs often vary by the type and size of vehicle. Sedans tend to get better gas mileage than bigger vehicles like trucks and SUVs, for example, and being mindful about how you purchase gas can save money at the pump.
Maintenance and repairs
The average cost of repairs, maintenance and tires is $123 a month for a new car, according to AAA. Common maintenance costs include oil changes and tire rotations, which are usually done at 5,000-mile intervals or, in this scenario, three times each year.
While you’ll likely need to pay for your normal maintenance brought on by wear and tear, you won’t have to pay for certain repair costs if your car is still under the factory warranty or an extended warranty. Manufacturer warranties are typically for three years or 36,000 miles, whichever you hit first.
If your car isn’t under warranty, set aside some money for repairs, whether they’re needed each month or not. This keeps you from being hit with an unexpected bill when irregular maintenance is needed.
Registration, fees and taxes
According to AAA, the average car owner will pay $762 in 2023 for licensing, registration and taxes to legally drive their vehicle.
How these fees are calculated, how often they are paid and how much they cost vary by state. Where you live and the type of fees you have to pay will determine how much you have to pay annually for this category.
Insurance
Almost every state requires some auto insurance coverage. The average annual premium for full-coverage insurance runs car owners $1,765, according to AAA.
But the cost of insurance is influenced by several factors, including the selected coverage, the type of car you drive, your age, your driving record and your location. Depending on your circumstances and coverage options, you might pay more or less than the average premium.
Car ownership index: Costs change monthly
The cost of owning a car fluctuates from month to month as prices among cost categories change. NerdWallet’s auto ownership index measures these changes using inflation figures from the Bureau of Labor Statistics.
Car ownership costs grew at a double-digit annual rate every month from April 2021 to November 2022, according to this NerdWallet Vehicle Ownership Costs Index. While that growth has slowed overall, the most recent data indicates ownership inflation was 12% in April. And since April 2019, the costs — including gas, repairs and maintenance, parking, insurance and licensing costs — have risen 38%.
Saving on your biggest car costs
By reviewing the total cost of ownership, you can see the portion of income that goes toward your car each month. It’s best to spend less than 15% to 20% of your take-home pay on vehicle costs, if possible.
If you find you’re over your car budget or if you want to reduce spending, look at your big-ticket items first and work your way through costs you can control.
Car payment. Learn about how to refinance your car loan and see if you can qualify for a better rate, especially if your credit has improved since buying your car. You may be able to lower your monthly car payment.
Insurance premiums. Talk with your current insurance provider about potential discounts. If they won’t help you get a better rate, get quotes from other insurers to locate a better deal on your coverage.
Gas. Pay attention to gas prices by using a gas price app to locate the cheapest prices, and use a credit card that offers the biggest discount.