The short answer
The average new car costs about $11,577 a year to own, or roughly $965 a month, according to AAA's 2025 figures. That covers depreciation, insurance, fuel, maintenance, financing, and fees — not just the loan payment. Depreciation alone averages $4,334 a year, the single largest expense.
How much does it really cost to own a car each year?
About $11,577 a year for the average new vehicle, or roughly $965 per month, based on AAA's 2025 cost-of-ownership study. That figure assumes 15,000 miles driven and bundles depreciation, insurance, fuel, maintenance and repairs, financing, registration, taxes, and fees — costs most buyers overlook when they fixate on the monthly payment.
The headline number masks wide variation by vehicle type. Small sedans and hybrids land well below average, while large pickups and SUVs can exceed $13,000 a year. See the full methodology in the AAA cost-of-ownership breakdown, then compare it against your own driving and ZIP code.
What are the biggest costs of owning a car?
Depreciation is the biggest cost at $4,334 a year, about 37% of the total, followed by insurance, fuel, financing, and maintenance. Fuel averages roughly 13 cents per mile nationally. Most drivers feel only the payment and the gas, but the value the car silently loses each year outweighs both.
| Cost category | Typical annual range | Notes |
|---|---|---|
| Depreciation | ~$4,334 | Largest cost; ~37% of the total |
| Full-coverage insurance | $2,236–$2,697 | Varies sharply by ZIP and driver |
| Fuel | ~13¢ per mile | ~$1,950/yr at 15,000 miles |
| Maintenance & repairs | ~$1,000+ | Rises as the car ages |
| Financing, taxes, fees | Varies | Interest, registration, license |
Insurance is the most controllable big line item. National full-coverage averages run between $2,236 and $2,697 a year per Bankrate, but your rate swings on location, driving record, and coverage level.
Why does depreciation cost so much?
Depreciation costs the most because a new car loses roughly 20% of its value in the first year and about 60% over five years. At $4,334 a year on average it is invisible — you never write a check for it — but you pay every dollar when you sell or trade in for less than you owe or paid.
- A new car can lose 9–11% of its value the moment it leaves the lot.
- Depreciation is steepest in years one through three, then flattens.
- Models with strong resale, like the Toyota Tacoma and RAV4, lose far less than average.
Because it dominates the budget, choosing a slow-depreciating model is the highest-leverage cost decision a buyer makes. Learn the mechanics in how fast a car loses its value.
How can you lower your yearly cost of ownership?
Buying a 3-to-4-year-old used car is the single biggest lever, because the first owner already absorbed the worst depreciation. Choosing a reliable, fuel-efficient model, shopping insurance annually, and keeping the car longer than the loan term all shave hundreds to thousands of dollars off the yearly total.
- Buy lightly used to skip the steepest depreciation years.
- Pick a model with proven reliability and strong resale value.
- Re-shop full-coverage insurance every year — rates drift.
- Follow the maintenance schedule to avoid bigger repair bills.
- Keep the car several years past payoff to spread its cost.
Before you buy, match the total to your income with the how-much-car-can-I-afford rule and weigh the loan-term trade-offs in 72- vs. 84-month loans.
Frequently asked questions
What is the cheapest car to own per year?
Small, fuel-efficient cars and hybrids are cheapest to own per year because they depreciate less in dollar terms, burn less fuel, and carry lower insurance. AAA found small sedans cost far less annually than pickups and large SUVs, which can top $13,000 a year.
Does car ownership cost more in cities?
Yes. Urban drivers usually pay more for insurance, parking, tolls, and registration, even though they may drive fewer miles. Insurance is the biggest swing: rates can vary by hundreds or thousands of dollars a year between a dense city ZIP code and a rural one.
How does depreciation affect total ownership cost?
Depreciation is the single largest cost of owning a new car, averaging $4,334 a year, or about 37% of the total. It is invisible because you do not write a check for it, but you pay it when you sell or trade in for less than you paid.
Is it cheaper to own a new car or a used car?
A used car is usually cheaper to own because the first owner absorbed the steepest depreciation. A 3-to-4-year-old car has already shed much of its value, so your yearly depreciation cost is far lower, even if repairs and interest rates run slightly higher.
Sources
CarsLens is editorial guidance, not individualized advice. This page draws on AAA and Bankrate.