Beyond the Price Tag: Understanding the Real Costs of a New Vehicle
Owning a new car in 2024 has become notably more expensive, with annual ownership costs reaching an average of $12,182, marking a substantial increase from the previous year when the annual cost was $10,728. These figures are according to AAA's Your Driving Costs (YDC) data, which has been a reliable source of information on the expenses associated with new vehicle ownership for over seven decades. This article delves into the key factors contributing to this surge in expenses, with a focus on the impact of global supply chain challenges and changes in vehicle pricing.
The Cost Breakdown
The 2023 YDC study reveals that the average MSRP for new vehicles stands at $34,876, a 4.7% increase from the previous year. It is essential to note that MSRP does not always align with the actual purchase price, which can fluctuate due to market demand. This increase in sticker prices directly influences finance costs, with an average annual finance charge of $1,253, representing a staggering 90% surge compared to the previous year.
Depreciation
Depreciation, the decline in a vehicle's value over time, is another significant cost factor. For 2023, new vehicles are projected to depreciate by an average of $4,538 per year over five years of ownership, reflecting a 24% increase compared to 2022. This increase is partially attributed to the rise in new vehicle prices and contrasts with the decreasing values of used vehicles.
Vehicle Characteristics
Automakers are increasingly producing larger, more luxurious, and consequently more expensive vehicles, often loaded with additional features that further drive up prices. This shift in vehicle characteristics contributes to the overall increase in ownership costs.
Fuel and Electric Charging Costs
While fuel costs per mile have seen a slight decrease, electric vehicle (EV) charging expenses have risen from 13.9 cents per kilowatt-hour (kWh) to 15.8 cents per kWh. This increase in EV charging costs is attributed to higher-than-expected inflation, according to the U.S. Energy Information Administration (EIA). It's worth noting that ½-ton pickups, despite their popularity, have the highest average driving costs among all vehicle categories covered in the YDC study.
Factors Impacting Pickup Trucks
Interestingly, the pickup truck market has slowed down in the past year due to rising gas prices and increased financial costs. While these vehicles excel at hauling and towing, many buyers do not utilize them for these purposes. As a result, potential buyers should consider the high cost of over $1 per mile associated with pickups.
Expert Insights
Greg Brannon, AAA's director of automotive research, emphasizes the importance of understanding the complete costs of owning a new vehicle. He advises consumers to negotiate the best deal, start their search early, secure pre-approval for financing, create a comprehensive budget that considers all ownership elements, and separate negotiations for the car's cost, finance rate, and trade-in value.
AAA Car Buying Advice
AAA offers several pieces of advice for car buyers:
- Know All Expenses: Understand all expenses associated with ownership to negotiate effectively.
- Start Early: Due to limited inventory, consumers may have to wait for delivery or pre-order their desired vehicle.
- Finance Rates: Obtain pre-approval from a financial institution to secure the best lending rate.
- Budget Wisely: Create a budget that considers insurance, gas, maintenance, and more.
- Separate Negotiations: Keep negotiations for the car's cost, finance rate, and trade-in value separate.
Your Driving Costs Calculator
The Your Driving Costs online calculator provides an interactive breakdown for car shoppers, aligning with AAA's annual analysis of new car ownership. It offers a personalized cost analysis based on location and driving habits, helping consumers determine if ownership costs align with their budgets.
In 2024, owning a new car has become notably more expensive, primarily due to factors such as rising vehicle prices, increased depreciation, and fluctuating fuel and electric charging costs. Understanding the full scope of ownership expenses and implementing AAA's car buying advice can help consumers make informed decisions.
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This article was co-written using AI and was then heavily edited and optimized by our editorial team.
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