At more than $3,000 per year, the hidden cost often goes unnoticed until time of resale
BOISE – (September 13, 2018) – Buyer beware: in the excitement of buying the newest and shiniest car on the lot, prospective owners sometimes fail to account for depreciation – on average, an expense of more than $3,000 per year that represents nearly 40 percent of the cost of owning a new vehicle. That’s one of the conclusions reached in AAA’s 2018 Your Driving Costs study.
“Sometimes when people purchase a new ride, it can lead to tunnel vision – they think in terms of the purchase price and the monthly payments, with less regard for other costs like insurance, fuel, financing, and especially depreciation,” says Matthew Conde, public affairs director for AAA Idaho. “Those who frequently change vehicles could be in for a rude awakening – the car that they’ve only owned for a short time might have a much lower resale value than they realize.”
In AAA’s latest study, 45 vehicles were evaluated to compare the costs of ownership. Based on 15,000 miles driven annually, including regular maintenance, repairs, insurance, fuel, license and registration fees, depreciation, loan interest, and a set of tires, the annual cost of a small sedan is $6,777 – the least expensive option. On the high side, the cost per year for a new pickup is $10,215.
Due to higher gas prices and finance charges, new car ownership is up 4.5 percent from last year.
AAA’s latest research identifies other trends – more Americans are switching from sedans to SUVs and pickups, so depreciation costs for sedans have increased by up to 13 percent this year. More drivers also say that their next vehicle will likely be electric (20 percent vs. 15 percent last year). Depreciation costs dipped slightly for these vehicles, suggesting green cars are holding their value.
“New vehicle owners enjoy the latest advances in technology, including connectivity, fuel efficiency, and safety features. But these vehicles, with all their sensors and systems, can be costly to repair,” Conde said. “Weigh the pros and cons carefully before deciding if a new car is right for you.”
If drivers choose a new ride over a quality, pre-owned option, Conde recommends hanging on to it for a long time and keeping it well-maintained to prevent more expensive repairs later. Avoid wasting money on expensive grades of fuel that aren’t required by the vehicle manufacturer, and slow down to improve fuel economy. View the full brochure at AAA.com/YourDrivingCosts.