What Is the True Cost of Owning a Car?

Gas, insurance, maintenance, and loan interest can really add up.

A new car owner drivers her car off the lot after paying with her credit card.

andresr / Getty Images

What costs go into owning a car? From paying for routine maintenance to keeping up-to-date insurance and endlessly filling up the gas tank, car ownership costs can add up quickly. Knowing what to expect can save you from getting in over your head. The last thing you want to deal with is an upside-down car loan or, worse, the repo man.

How Much Does the Car Itself Cost?

In July 2020, the industry-wide average cost of a brand-new car totaled $38,378, according to Kelley Blue Book. That’s a lot of money. Of course, the average consumer isn’t buying a new car every time they flip a page on the calendar, so the car's cost is amortized over the length of time you own the car. According to research by R.L. Polk, the average length of time drivers will keep a new vehicle is 71.4 months or about six years. At that rate, if you buy your car with no financing, you’re looking at an average cost of $533 a month.

  • Average Monthly Cost of Ownership: $533
  • Average Annual Cost of Ownership: $6,396

Calculate the Insurance Rate

But most people don’t buy a car without taking out a loan. If you have excellent credit (720+) and apply for a 60-month loan, you’re looking at an average annual interest rate of around 2.87%. If you don’t put down a down payment, you’re looking to pay an extra $2,707 more over the car's lifetime. Again assuming you keep your car for the average amount of time, you’re looking at paying that amount spread over 60 months and then paying nothing for the last 11.4 months of ownership, working out to an average of $37.91 extra per month. If, on the other hand, you only have fair credit (620-659), you can expect an interest rate of around 13.58% per year. It would bring your total costs up to $13,894 in interest over 60 months—an average of $194.59 per month—and $2,335 per year, for the vehicle's lifetime.

  • Monthly Interest Cost on a 60-Month Loan (Excellent Credit): $37.91
  • Annual Interest Cost on a 60-Month Loan (Excellent Credit): $454.92
  • Monthly Interest Cost on a 60-Month Loan (Fair Credit): $194.59
  • Annual Interest Cost on a 60-Month Loan (Fair Credit): $2,335

Cost of Car Insurance

Of all the factors on this list, car insurance costs are among the hardest things to determine without more information. Everything from your credit score, age, and marital status, to the city in which you live and how often you drive your vehicle, will impact how much you will pay. Your best bet is searching the internet for “free car insurance quotes” and comparing rates, and speaking to friends and families about companies they recommend. But for convenience's sake, let’s imagine that you, your city, your vehicle and your driving habits are perfectly average in every way. According to NerdWallet's 2021 rate analysis, the average annual cost of car insurance in America is $1,592, which works out to $132.6 per month.

If you are in a car accident, you will be responsible for the deductible to get your vehicle repaired. If you do not have the proper coverage for the accident at hand, you will be responsible for the full amount. Don't forget about traffic violations and the costs that come along with them. Higher insurance rates and fines are both to be expected if you receive a ticket.

Cost of Gas

Gas prices are also highly variable and can change from day to day—or from one side of the highway to the other. It’s impossible to predict how much gas prices will fluctuate accurately, but in the past five years, the U.S. average price for gas has varied between $1.87 and $2.99 per gallon.

Assuming that an “average year” is somewhere in between, let's assume you can expect to pay around $2.00 per gallon of gas. Even more important than the price of gas is the gas mileage of your particular vehicle and how much you drive in a given month. In 2019, the average gas mileage of new vehicles sold in the United States was 24.9 miles per gallon. The average American, the Federal Highway Administration reports, travels about 13,476 miles per year. But the most significant two determinants of how far you will drive are your age and your gender, so it’s worth checking out their chart.

Assuming you are (once again) average in every way, you can find out your annual gas costs by dividing the miles driven per year by the miles per gallon your vehicle gets, then multiplying that number by the price per gallon. In this “average” case, the math is (13,476 / 24.9) • $2.00 = $1,082.41 per year.

  • Average Monthly Gas Cost: $90.20
  • Average Annual Gas Cost: $1,082.41

Cost of Maintenance

Car maintenance costs can also vary quite a bit, and total up to several thousand dollars per year.

Total Costs

As you can see, all of these costs add up! When you include the price of ownership, the price of your loan, the costs of insurance, costs of maintenance, and costs of gas, you are looking at spending around $10,800 to $12,000 per year to own a car—bringing the total costs to almost $68,400 over the six years of car ownership on average.

Driving gets expensive, leaving many opting out of car ownership. Taking public transit and using rideshare services like Uber or Lyft can be a huge cost saving. Consider all of your options and the full scope of the situation before going all-in on buying a car.

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Kelley Blue Book. "Average New-Vehicle Prices Up 2% Year-Over-Year in July 2020, According to Kelley Blue Book."

  2. R.L. Polk. "Polk in the News: Americans Are Keeping New Vehicles An Average of Nearly Six Years."

  3. NerdWallet. "Average Car Insurance Costs in 2021."

  4. U.S. Energy Information Administration. "U.S. All Grades All Formulations Retail Gasoline Prices (Dollars per Gallon)."

  5. United States Environmental Protection Agency. "Highlights of the Automotive Trends Report."

  6. U.S. Department of Transportation. "Average Annual Miles per Driver by Age Group."

Related Articles