Car Ownership Costs Just Passed a Depressing Threshold
Car ownership costs have reached record highs. What could be behind that?
Written by Andrew Kidd
Reviewed by Kathleen Flear
That's according to a report from
AAA
, which notes that higher-than-usual prices at the pump have caused the yearly cost of vehicle ownership to break the $10,000 threshold for the first time.Is this the new reality—or is there a more affordable solution within reach to new vehicle buyers?
Fueled by fuel costs
AAA's research shows that the average annual cost of owning and operating a new vehicle has jumped to $10,728—or $894 per month—in 2022.
This is an increase from 2021, which saw the average yearly cost to own a vehicle hit $9,666, or $805.50 per month.
And according to the automotive organization, fuel prices are the most significant contributor to this increased cost of ownership figure.
AAA's director of automotive engineering, Greg Brannon, said in a press release that new vehicle customers are beginning to pay more attention when they're purchasing a new vehicle because of increased costs across the board thanks to inflation and lingering global supply chain issues.
"With the recent increase in fuel prices, more and more people want to know the true costs of owning a car beyond their monthly payment," Brannon said.
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Going electric
AAA's study used projected fuel costs based on an average of the first five months of 2022 when fuel prices averaged around 18 cents per mile or $3.99 per gallon. Because gas prices climbed in early spring and summer, the cost of vehicle ownership increased as a result.
The organization found that because of this, more and more new vehicle buyers are looking to electric vehicles to ease the pain of high gas prices.
EVs are cheaper to own and operate
Electric vehicles in general have lower maintenance, repair, and tire costs compared with their gas-powered cousins—mainly because gas-powered vehicles have so many more moving parts, filters, and fluids that need to be serviced.
AAA notes that electric vehicles have the second-lowest annual cost of ownership behind small sedans; electric vehicle owners will spend around 4 cents per mile to charge their vehicle at home, while gas-guzzler owners spend 18.4 cents per mile on average to fuel up.
It breaks down like this: if an electric vehicle owner and an internal combustion vehicle owner were to drive 15,000 miles per year, it would cost around $2,700 to fill up the gas tank on the gas-powered vehicle compared with just $600 per year to charge the electric vehicle.
That means, on average, electric vehicle owners save around $2,100 annually on fuel costs.
They're also cheaper right out of the gate; many electric vehicles have lower initial costs because of federal tax incentives and state rebates aimed at getting people to switch to more eco-friendly transport.
MORE: 46% Of People Don’t Know About Electric Vehicle Incentives
Gas prices dropping steadily
This incentive to go electric has been pretty urgent for many vehicle owners as they found themselves paying exorbitant prices at the pump for much of 2022. Gas prices are dropping steadily, but that doesn't mean they'll stay that way.
AAA
reports that gas prices are just over a dollar less per gallon in August than their peak prices in June. While that means some temporary relief, the upcoming hurricane season could threaten oil production in the Gulf of Mexico—meaning the price of oil could go up overnight.Climate change is causing more severe weather events to happen more often; oil production may continue to be disrupted more frequently to match.
If this continues, will consumers finally let off the gas and give electric vehicles more attention?
It's possible! But electric vehicles currently can be more expensive to insure than gas-powered cars and trucks.
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