Auto financing has raised the price of buying a car to an all-time high, according to a new report. Findings from AAA show that the average yearly cost of owning a vehicle is $9,282, the highest amount since the motor club began tracking such data nearly 70 years ago.
The data comes from AAA’s Your Driving Costs report, which reviewed 45 models across several categories, including fuel prices, insurance rates, depreciation and more. Here are some key findings from the study:
- People are paying an average of $773.50 a month for their vehicles due to auto financing and other expenses.
- Finance costs have jumped nearly $200 from $744 to $920. That’s a 24% increase from last year.
Report: Why buying a new car costs more today
Two primary reasons for the increase in auto financing costs were higher vehicle prices and federal interest rates, which were rising at the time, AAA says.
Another factor impacting vehicle owners’ wallets is that more people are taking out 72-month car loans. These loans may make for lower monthly payments, but you end up spending more money overall.
Money expert Clark Howard says that because of depreciation, the amount of interest you pay with a long-term loan isn’t worth it.
“The longest auto loan you should ever take out is 42 months,” Clark says. “If you can’t afford the payment on a 42-month loan, then you should buy a cheaper car.”
Here are the average annual costs by new vehicle category based on 15,000 miles driven yearly, according to AAA:
Average annual costs by new vehicle category
|New Vehicle Category||Average Annual Cost|
AAA says those figures also include expenses like registration, taxes and license fees. Of course, your new vehicle doesn’t have to be a money pit. Let’s talk about how you can save behind the wheel:
Action plan: 3 ways to save money on your new car
If you’re thinking of buying a new car, here are some ways to save money on your financing, gas and insurance.
1. Pre-arrange your auto financing
Dealers typically charge around 2% more for auto financing. That’s why money expert Clark Howard strongly recommends that you finance your car independent of the dealer. In your research, if you find that the dealer has the best terms, go with the dealer.
- Consider a mid-level car: Many people want all the bells and whistles, but financing a mid-level model will cost less. Buying the right one can also be profitable for resale value.
2. Save on gasoline
Another easy way to cut down on vehicle expenses is to find cheap gas so you won’t have to pay as much at the pump.
Clark is a big fan of using gas price apps that use your location to pinpoint where the cheap fuel is. “The difference from one station to another can end up being as much as 30 cents a gallon,” Clark says.
- Take advantage of station loyalty programs: From earning cash back to free gas, joining a gas station rewards program can also yield big savings. Here are the best ones.
- Use good fuel: Filling up your tank with high-quality gas will keep it on the road longer. Here are gas stations that use Top Tier gas.
3. Save on insurance
When it comes to auto insurance, doing a little homework on the front end can save you tons of money. Here’s what you want to look for:
- Bundling your policies: You can typically get a discount if you bundle your auto and home insurance. Ask your insurer for details.
- Discount programs: Many insurers offer affinity deals based on church, fraternity or other memberships. Find more ways to save here.
The key takeaway here is that car shoppers can’t just look at the sticker price to gauge a vehicle’s true impact on your wallet. Fuel prices, how you maintain your vehicle and other factors all play into your overall car expenses.