The cost of owning a car
The biggest cost to new car owners came almost as soon as they drove away from the forecourt, with depreciation contributing to a $3,721 loss in value on their new purchase. Rising 12% from a year earlier, most of the increase was due to the higher average vehicle purchase price of small sedans, large sedans and electric vehicles. Higher vehicle prices and a rise in average sales rate tax resulted in a 13% hike in the cost of licensing and registration last year to $851, while the best auto insurance (opens in new tab) remained a significant outlay for most drivers at an average cost of $1,202, despite rising just 0.4% on a year earlier. And while motorists who buy a new car might not feel the need to spend on roadside assistance cover (opens in new tab), the cost of maintenance, repair and tires increased 4% year-over-year to 9 cents a mile. With the rise mainly due to an increase in the national labor rate, it is also something that those who drive an older car might consider when weighing the benefits of extended car warranties (opens in new tab). Where new car owners could save last year, however, was on the best auto loans (opens in new tab). With the interest rates on new car loans almost 1% lower than a year earlier, the typical cost of car finance dropped 11% to $819 a year. The other major saving made by motorists was in fuel costs, with gas prices dropping 8% lower year-over-year to 11 cents a mile, thanks to an increase in gas supply coinciding with the lockdown-related decrease in demand.
What are the cheapest cars to run?
For those eager to keep their driving expenses low, AAA (opens in new tab) also found that significant differences exist between the driving costs associated with different vehicles too. So if you want to save money, and don’t need a large vehicle, the cheapest car to run is a small sedan, at just 50.1 cents per mile. Hybrid vehicles are the next most affordable at 54.32 cents per mile, followed by small SUVs at 55.75 cents, which benefit from being the cheapest vehicle to insure. Electric vehicles cost a very reasonable 60.79 cents per mile, and are great for the environment too, while at the other end of the spectrum, pickups are most costly to run, at 75.39 cents per mile.
Should you buy a new car?
While the immediate impact of coronavirus saw a slump in the number of Americans buying cars in the first half of last year, vehicle sales bounced back strongly from the summer, as restrictions eased and showrooms adapted and reopened. As to whether now is a good time to buy a car (opens in new tab), much will depend on your personal circumstances, in relation to both your finances and how you anticipate using a car going forward. The low cost of car loans will prove a major draw to many, particularly if people feel safe in their job and are comfortable they could still meet other obligations, such as payments on personal loans (opens in new tab), should their situation suddenly change for the worse. You’ll also need a good credit score, or should look to boost your credit rating (opens in new tab), if you want the best rates. For many motorists, however, and in particular those working from home, the pandemic will have seen a re-think over what they need from a vehicle. Sales of used cars have surged as a result (opens in new tab), and that will have saved motorists thousands of dollars on their driving costs by itself.
