The Cost of Ownership: Financing a Car Hasn't Gotten Any Cheaper, Says AAA

Matt Posky
by Matt Posky

The American Automobile Association (AAA) suggests that long-term loans are encouraging ownership costs of new vehicles to climb. In some instances, the group suggests customers could be on the hook for well over $10,000 per year. While this only applies to larger and more expensive automobiles, AAA says the trend is all-encompassing — spurred largely by changing finance conditions.

According to AAA’s latest research, finance costs on new vehicle purchases have jumped 24 percent in 2019, elevating the average annual cost of car ownership to $9,282 ($773.50 per month).

“Finance costs accounted for more than 40 [percent] of the total increase in average vehicle ownership costs,” elaborated John Nielsen, AAA’s managing director for Automotive Engineering & Repair. “AAA found finance charges rose more sharply in the last 12 months than any major expense associated with owning a vehicle.”

The American Automobile Association’s annual driving cost study has been in place since 1950. This year it sampled 45 of the U.S.’s most popular models from nine different segments. Cost of ownership presumes vehicles will be driven 15,000 miles annually and is calculated against six categories: fuel prices, maintenance/repair fees, insurance rates, license/registration/taxes, depreciation, and finance charges. Annual average costs increased in each category over the last 12 months. The latest study covered the period between June of 2018 and May of 2019.

Depreciation is typically the single biggest contributor to a vehicle’s overall cost of ownership, accounting for more than a third of the average annual cost. While AAA noted that depreciation slowed this year, vehicles included in the study still ended up losing an average of $3,334 a year. That’s up $45 (roughly 1.4 percent) from last year. For 2018, deprecation rose by $117 (3.7 percent). However, the average depreciation of small and medium sized sedans actually improved in 2019.

Meanwhile, finance charges rose from $744 to $920. While federal interest rates and higher vehicle prices played important factors, AAA suggested the proliferation of 72-month loans made the most difference. Longer loan terms always translate into more money in the end, and these days, people are having a difficult time coming up with cash up front.

Other noteworthy findings from AAA:

Average fuel cost rose to 11.6 cents per mile, 5 [percent] higher than last year. The per-mile increase was driven by gasoline prices, which are up 15.6 cents per gallon over the timeframe covered by the study. Electricity prices for EV charging also rose 0.1 cent per kilowatt-hour (0.08 [percent]), but the market share of the electric vehicles in the study (0.48 [percent]) makes the effect of this increase on the overall average fuel cost negligible. Fuel costs vary widely by vehicle type, ranging from a low of 3.65 cents per mile for electric vehicles, to 15.67 cents per mile for pickup trucks.

Average maintenance and repair costs climbed marginally to 8.94 cents per mile, up 8.9 [percent] over last year. The increase was fueled by the growing complexity of vehicle systems and an updated methodology for calculating repair costs.

Electric vehicles had the lowest maintenance and repair costs — 6.6 cents per mile — while medium-sized SUVs had the highest at 9.6 cents per mile.

The cost of licenses, registration fees and taxes rose $14 to $753 per year, an increase of 1.9 [percent].

AAA suggested numerous ways of mitigating ownership costs, including all the old standbys: trying to get the shortest-term loan your finances allow, figuring out insurance premiums in advance, buying at the end of the month, buying gently used, buying a late-model vehicle that the dealership is desperate to offload, and attempting to procure dealer discounts. But that doesn’t address the core issue here.

Consumers will only be able to stretch their budgets so far before the industry starts seeing people bow out. In fact, with individuals keeping their vehicles longer than ever before, we may already be witnessing the start of that. Sales are also cooling off, encouraging manufactures to lean into large, high-margin vehicles in the United States.

Unfortunately, those models are the ones that cost the most to run. While the average midsize sedan costs roughly $8,643 to operate annually, according to AAA’s data, a middleweight SUV/CUV costs $10,265. Small sedans ($7,114) were similarly inexpensive compared to small SUV/CUVs ($8,394). Hybrids ($7,736) managed to undercut pure electrics ($8,320) thanks to their having lower MSRPs on average. However, it should be said that the difference would have been greater without EV subsidies in place. At $10,839 per year, pickups were shown to have the highest cost of ownership.

[Image: F8 Studio/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Crazyforwheels Crazyforwheels on Sep 25, 2019

    I keep track of all expenses and can say that the figures quoted in this article are accurate. My daughter graduated from university and obtained a job in a distant city 5 years ago. Because she had no money, I advised her to not buy a car and I helped her find an apartment on a bus route to her new job. The bonus is a car rental agency just 3 blocks away, if she needs a car. During the last 5 years, she's been able to get everywhere she needs to go and accumulate a nice savings amount. We calculated that her savings would be much less if she owned a car. A car that would sit 8 to 10 hours overnight and sit 8 hours or more while she's working.

    • See 2 previous
    • Olivebranch2006 Olivebranch2006 on Sep 25, 2019

      @Cactuar I'm better than I deserve :)

  • JD-Shifty JD-Shifty on Sep 27, 2019

    I drive a truck with 495,000 miles on it. In the meantime fools have spent hundreds of thousands of dollars each borrowing money to pay for vehicles.

  • Wolfwagen Is it me or have auto shows just turned to meh? To me, there isn't much excitement anymore. it's like we have hit a second malaise era. Every new vehicle is some cookie-cutter CUV. No cutting-edge designs. No talk of any great powertrains, or technological achievements. It's sort of expected with the push to EVs but there is no news on that front either. No new battery tech, no new charging tech. Nothing.
  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
  • Oberkanone Where is the value here? Magna is assembling the vehicles. The IP is not novel. Just buy the IP at bankruptcy stage for next to nothing.
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