The yearly cost of car ownership has risen sharply according to the American Automobile Association (AAA) Your Driving Costs study, with the average expense of owning a new car soaring to $12,182 annually in 2023.
AAA reports a nearly 13.6 percent jump year-over-year from the $10,728 of costs new car owners incurred during 2022, with average monthly expenses of car ownership growing from $894 to $1,015.
The Your Driving Costs study identifies the aftereffects of 2022’s scrambled supply chains as largely responsible for the higher costs. Supply chain troubles led to smaller inventories, which in turn caused demand to drive up new vehicle prices. The effects continue to push new car ownership prices higher even after the supply chain and inventory situations improved.
Finance rates are also a big factor in jacking up the expense of new-car ownership for 2023 buyers. The study reports an eye-watering 90 percent increase in the annual average finance charge, reaching $1,253 for a typical vehicle.
“Oversized, luxurious, and expensive vehicles, loaded with extra features” becoming a mainstay of automaker production has also contributed to the mushrooming costs of car ownership, AAA notes. The moderating cost of used cars also played a role, though as GM Authority recently reported, only 12.4 percent of used cars currently cost under $20,000 versus nearly 50 percent pre-pandemic.
Pickups such as GM’s high-demand Chevy Silverado and GMC Sierra trucks are now more costly to operate, the study indicates. Director of automotive research for AAA Greg Brannon remarks that “the once popular pickup truck is now seeing a slight decline in demand as these vehicles have become increasingly expensive, rivaling the price of many luxury cars.”
In order to keep the cost of new-car ownership under control, the study recommends starting a purchase early to avoid inventory bottlenecks, obtaining pre-approved financing from a third-party institution, and including insurance, gas, and other expenses when preparing an auto budget, among other steps.
Meanwhile, GMC models occupy two of the top three places in the full-size pickup segment for average transaction price (ATP) in Q2 2023, echoing the study’s findings. The models in question include the GMC Hummer EV Pickup and the GMC Sierra.
While GMC Sierra ATP rose 6.2 percent in Q2, average transaction prices for The General overall increased 4 percent. GM total vehicle sales for the second quarter grew 19 percent year-over-year to 689,095 units, approaching pre-COVID figures of roughly 750,000 sales in an average recent second quarter.
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Comments
No one seems to report the elephant in the room. EV’s are more expensive. ICE car prices have been rising for features, but one of those features is better mileage. You’d never buy a car that cost an extra grand for 1MPG. But the automakers would if they pay a penalty for CAFE. So you will pay the extra grand.
mkAtx: Total BS.
What’s driving those numbers is American’s addiction to huge vehicles that swell fuel at levels beyond anything. People going out and insisting that they have every feature from massive sunroofs to self driving to butt coolers. It’s everyone thinking they must have 4×4 or AWD. It’s the mine is bigger and fancier than yours. It’s the insistence on more and more power. And finally, it’s the push for SUV/CUV’s. That’s where your pricing is getting pushed way up.
To attempt to blame this on EV’s is beyond ridiculous.
GM has admitted they are using profits from ICE vehicles to pay for the expensive transition to EV. Therefore, we see an annual rise in auto prices over the last three years. Particularly the lucrative truck market. But, you say the rise in price is not related to the shift to EV?
jeremy: What you are failing to talk about is that NOBODY is forcing anyone to pay any prices. It’s the customers who are currently and will most likely continue to pay for these expensive vehicles no matter if ICE or EV. Anyone who thinks paying a penny more that 40 grand for any truck is nuts. Unless you truly need a heavy duty truck to haul, tow and work with, then the other 90% or more are just buying a truck because it’s what they want. The manufacturers see and know this, so pricing is adjusted accordingly.
Anyone attempting to tie this into EV’s specifically is total BS and you know it. If you don’t like or want an EV, fine. Just say that. But don’t push this BS junk that it’s the EV’s that are causing this problem.
This we can agree on. Which is why I will be ordering my new Silverado to avoid getting a bunch of options I don’t really want or need. I need a basic truck that’s comfortable and can haul/tow when needed. I don’t need a jacked up 4×4 driveway queen Cadillac. In fact GM doesn’t make them basic enough for me. I need power and utility in a truck, I don’t need infotainment, plush interior, or sun roofs but some of that stuff can’t be avoided with the package setups. For example, I’m considering a 3.0 diesel for fuel economy but I can’t get that engine in a 2-door truck. I can’t get that engine in a WT, I have to buy at least a 4-door LT to get that engine. That means my truck starts at $50k instead of $42k. I can afford either one, but you are correct, this is how people get in trouble with huge payments.
Carl: Actually, you and I agree on a lot. I wasn’t trying to be an idiot about the leasing thing, but just trying to keep it real. Leasing is certainly NOT for everyone and I normally purchase instead of lease. For me, it all depends on the deal. For example, I will never spend 40 or 50 grand or more for a new car. But a few years ago I leased a new Volvo S60 T8 Inscription. It was a totally loaded car with an MSRP of 55 grand. The only reason I leased it was because my payment was $392/month all included with only $1,000 down (24 month lease). Now that was a deal.
But when it comes to more basic cars, I totally agree with you and it really burns me that they force all this junk on people just for one feature. I special ordered my 2023 Bolt EV because I didn’t want all the extra stuff and my MSRP was $28,300. I really enjoy good music from a nice sound system, but to get the Bose I would have had to go up a model and a package that would have added nearly 3 grand to the price. No thanks, so I passed and settled for the “nice enough” sound in my car.
You are spot on. And people are clamoring to stealerships to pay their outrageous prices for suv’s and pickups.
in another decade you will be priced out of owning a vehicle (sooner but im accounting for all the old vehicles that will still float around running). you will uber or robo taxi around. working as intended. i weep for the next generations….
the mobility of the people needs to be stopped. you will go where you are told when you are told. but you will still pay road taxes, dont worry.
Here’s a trick. After your loan is paid off keep the car you have for another 4-5 years and continue to pay yourself the same amount you were paying the bank. For example, if you were paying $500/mo for your car loan, continue to put aside $500/mo. Then in another 4-5 years you will have $24K-$30K saved up. That, plus the trade-in value of your old car, will give you a healthy down payment on the eventual replacement. Most cars these days, when properly maintained, will go 10 years with little trouble. It’s all about being smart about it and not trading for a new car every 3-5 years. If you drive 25,000-30,000 miles per year, then obviously this might not work for you. But if only driving the average 12,000-15,000 miles per year it should be fine for 10-12 years.
Yup that’s what I do, I have 3 and keep them 10-15 years, replacing one every 5 years or when the rebates are high. Right now I have an 09, 12, and a 19 (all under 100k miles) so I will order something new (ICE) when the current craziness subsides.
Here’s another trick: Buy what what you can afford, not necessarily what you want.
How much of the extra costs are related to people buying the vehicle versus leasing? Most leases are quite unfriendly these days so maybe individuals have decided to take the higher cost and will keep longer than what they’ve done in the past.
In the long run purchase is always cheaper than a lease. The key is to take good care of it and keep it after you have paid it off and enjoy the cheap miles for a few years to bring down the overall cost.
Carl: That is absolutely NOT true. I work in this business and have for a total of 24+ years. Leasing is very good in a lot of cases, but not all. For example, when I got my 2023 Bolt EV, I wanted to lease but the deal was terrible and I purchased. So I’m not a person who will say that you should lease no matter what. But there are certainly times where a lease is way better than a purchase. Keep in mind that nearly all brands offer free maintenance that will cover most or all of the normal lease terms. So outside of gas/charging costs, insurance and the payment, there is nothing more for the customer to pay out of pocket in a lease. Not only that, but in a lease you are only paying for the portion of the vehicle that you use.
Now, the problem in all this is that customers have used this advantage to get more vehicle than they should or need. In other words, they have killed the true lease advantage by getting way more vehicle and thus they now have huge lease payments. But using the lease to your advantage can be a smart way to go.
Maintenance is almost a non issue for a new vehicle whether you lease or purchase, besides oil changes there shouldn’t really be any other maintenance costs not under warranty and many new purchases come with maintenance and oil changes included. “Only paying for the portion of the vehicle you use”? What does that mean? What it means to me is that with a lease the customer is paying for the most expensive miles in the vehicles life, which are at the beginning during the greatest value depreciation period. Do you really think that the dealer is going to eat that? No, it’s made up in the initial down payment, lease payment, residual value, and mileage limits. It’s a very complicated formula created to make money for the the dealer. They aren’t going to lose anything. It’s similar to an adjustable rate mortgage with artificially low payments for the first few years and then a balloon payment to catch up. It may be desirable for people who want to drive something new every two years, but it’s not cheaper over the long haul.
So Carl, when you purchase the dealers don’t make money? The banks don’t make money?
Just the way you responded to everything I said tells me that you really don’t understand leasing well and/or you really didn’t fully read what I said. I don’t say leasing is the best way or only way. It certainly depends on the “deal” being offered.
Paying for the portion of the car you use: Yes. You aren’t buying the car, thus not paying for it all. If you only need a certain term/miles, that’s what you pay for. Of course, you don’t “own” the vehicle after 24/36 months, but most people who “purchase” never own the vehicle after 24/36 months either. And because people are buying way more vehicle than they should, most are upside down (purchases) until around the 48 to 55 month mark.
I brought up the included maintenance because you brought up paying the car off and then keeping it for 4 or 5 more years. Thus, anything beyond what the factory includes is totally out of your pocket. Same with out of warranty repairs. Bottom line is that leasing can be very good for many people. Your blanket statement above saying a purchase is “always” cheaper than a lease is just not true.
Check out Dave Ramsey he does a good financial analysis of vehicle lease vs purchase. I know too many people who were “sold” a lease and we’re sorry later. I agree they didn’t do enough homework and fell for the pitch. Complaints like, ran out of miles, condition issues like parking lot dings, and forced to trade, re-lease or purchase at a set date that may not be optimal for them or the market. I love vehicles and always have at least 3 so I can buy new every 4-5 years. I take immaculate care of them and have very little out of pocket maintenance beyond (oil changes, battery, and brakes) maybe some other minor items in 80k miles. Those are pretty cheap miles over the life of the vehicle. So that works for me but maybe not others.
Carl: You may find this difficult to believe, but this is true. I lived in Nashville (TN) for a year and worked at a very nice Cadillac store. They knew Dave R and he had actually gotten vehicles from there. Guess what? Dave R. has actually leased vehicles himself! I’ve taken his classes in the past and I’ve spoken with Dave on his radio show years ago, so I’m familiar with his story and what he suggests to others. I have no idea what he’s doing now, but he has certainly leased in the past.
The other stuff you bring up is very true and real and it’s those things that will catch people at lease end. But the problem with those examples is that you also get that same “hit” if you own. For example, if someone leases or buy the exact same car and it’s the exact same miles/condition after 3 years when they turn it in or go to trade it in, those conditions and extra miles will hurt the value on the “owned” car upon trade in. It’s just handled differently.
How about the real elephant in the room? Car Insurance! The insurance companies have gone crazy with increases. When I was 21 years old with a Corvette, my insurance was cheaper than it is now on a 19 year old pickup truck. My driving record is clear for three decades back. That is financial rape!
Well America is addicted to overpriced trucks/SUVs. You guys need to learn to read, why are you even mentioning EVs? This article is about how much it costs the customers to maintain(repairs/maintenance) their vehicles each year. Regardless of how you feel about EVs, one advantage of owning an EV over an ice vehicle is the low maintenance costs. But to ACZ’s point, car insurance is crazy these days.