Am I well below the average? I spent $22k on a new car in 1999 that I stopped driving in 2022. I would guess I spent $15k on maintenance and repairs, but let's go on the high end and say $20k for that. That means it cost me an average of $42k / 23 = $1826 per year for that car, excluding fuel. In a year that I drove 10k miles, when the car's fuel economy was 24 MPG and the fuel cost $4 per gallon, the fuel would cost me 10k / 24 * $4 = $1667. That's $3493 per year. Why is the average so much higher?
Following the links [1] with quotes I've selected, the answers seem to be mainly:
1) You forgot about insurance
2) Your car's value was in 1999 dollars, not 2022 -- $1 in 1999 was worth $1.71 in 2022, so you need to adjust your yearly cost upwards into 2022 dollars
3) You haven't mentioned loan interest, which is additional cost if you financed it, which the average person needs to do
4) If $22K was below average for a new car in 1999, then your yearly cost will be below average as well
So just multiplying by 1.5 for inflation (an estimation) and adding $1,771 insurance brings us to $7,010. With some cost of financing and if it's a little below average to begin with, it seems to be roughly accurate.
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Source quotes:
"The average cost of full coverage car insurance in 2022 is $1,771 per year"
"Monthly loan payments for new cars jumped to an average of $700 in the third quarter of 2022, while used vehicle loans averaged $525 per month, according to Experian."
"Registration fees vary from state to state. While some states charge a flat fee for all vehicles, others base the registration cost on age, horsepower or weight of the vehicle. Registration fees in Oregon are the highest in the country, ranging from $268.50 to $636.50 for first time registration. Arizona has the cheapest registration fee of just $8..."
"A car’s depreciation varies widely. In 2021, the average annual cost of depreciation is $3,900, according to AAA."
>There’s little reason to carry full coverage on a car over 7 years old
Can you elucidate? I assume by 'full coverage' you mean comprehensive (you get paid if your car gets damaged), vs liability-only (other person gets paid if you damage their dar).
Doing some very approximative math, my 7 year old car is worth $12k, and adding comprehensive insurance costs an additional $500/year. Why is it so obvious I wouldn't want that?
Do you figure there is a 4% chance your car gets totaled each year (in a crash that’s not someone else’s fault)? That sounds pretty high.
I don’t buy collision for a few reasons:
1. I can afford to self-insure.
2. If I pay for collision, I’m more likely to make a claim, which will make my insurance even more expensive in the future. Also, using insurance makes the repairs more expensive, and otherwise incurs more costs to society (various people will be involved in the claims process). These costs are incorporated into the price of the insurance.
I can understand paying for it if losing your car would ruin you, or if you think you are much more likely than average to crash (in a way the insurance rate for your demographic doesn’t capture), but otherwise it seems like a bad deal.
Different states call it different things, but I’m talking about dropping “collision” and “other than collision” coverage as the car gets older.
Your chance of a total loss on the car from a collision that’s your fault or a non-collision loss is well under 4%/year (the economic break even if your additional coverage is $500 on $12K). If you can’t write a check for $12K, you might need to keep the coverage. If you can, you make money (statistically) by dropping it.
Making money based on statistics is what the insurance company does. The whole point of insurance is paying extra money to the insurance company in case I'm personally on the wrong side of the statistic.
That makes sense for ruinous losses. If $12K would be a ruinous loss, you’re doing precisely the right thing, if you assume you have to have that exact car.
Having a $5K car would probably be more financially appropriate, but that’s a side topic when considering only “buy this insurance or not”.
If you choose to self-insure, that only lowers your true cost by whatever the insurance company's profit margin is, not by the full amount of the payment.
You might come out ahead, you might come out behind, but the risk of losing the car is still, on average, costing you something.
Insurance, registration, property taxes (in some areas).
Not sure if that annual costs includes parking and other things that cost, but aren’t obvious for many people (many of us park for “free”, but we’ve paid for those space through higher rents, mortgages, etc).
For the rest of the money, the average new car costs around $50k today. And the average ownership length is about 8 years. Average loan length is approaching 6 years. So, $8333/year to service principal, plus interest, etc. Then only 2-3 years of only fuel/maintenance before starting over again. Plus the majority of depreciation is during those fist few years. On a $50k car, that’s probably $20k of lost value, if not more.
Yes, not everybody buys new cars. But, lots of people do, and they spend an ungodly amount of money on them.
It's hilarious to me that anyone would overlook 25 years of registration fees, considering that Californians literally overthrew their government because of registration fees. Maybe in their jurisdiction it's not that costly.
Registration for my 1999 car was only $70 per year and there were no property taxes. Insurance was a more significant cost and harder to estimate, but still not major.
Regardless, I agree that these expenses add up fast. If I replaced my regular commutes with a $3000 e-bike that lasts 2 years, and I spent $2k per year on Ubers and rentals for various things that require a vehicle, I would come out ahead.
Why would your ebike only last 2 years? I would say even if someone doesn't take care at all for their bike it should last 4 years minimum (and much longer on average).
Right? My $2k e-bike has lasted far longer than that with a $5 bottle of oil and a few $20 inner-tubes. I spend more for 1 tank of gas than I have on that e-bike for maintenance in 4 years.
You are well below average basically across the board. Most people don't keep a car 23 years (I think about half that is average), buy fairly expensive cars (average car price today is well above what you paid even adjusted for inflation), drive cars with less than great gas mileage, drive more than 10k miles per year (15k if I remember right), and buy unreliable car brands that cost a lot in repairs. You're also not factoring in insurance.
But then it is sold, so you recoup part of the value.
Also, average new car cost is the wrong metric. One ether has to use average car cost, including used cars, or track ownership costs of a new car excluding any secondary market transactions. E.g. until it is not road worthy anymore.
I'd guess the average is higher due to a few factors. First being that people, on average, don't keep a car nearly that long. Average ownership (after a quick search) seems to be around 5-7 years. Another thing might be your fuel economy given the most popular "car" in the US is a pickup truck. Also there is the cost of insurance, which I'm not sure you counted.
Yeah, those are crazy numbers. They're assuming the average consumer will drive a $40K car with no downpayment taking on 7~8% loan, with no capture of value when selling the car.
If that's the case, it just speaks volume of the inflation and the devaluation of the money that the cost of $10K for car being normalized.
With inflation, the money the consumer will get back when selling the car will be higher. That's not factored into the ownership cost.
