How Much Does it Cost to Own a Car Per Year?

“Cars are expensive” is a common phrase on the streets. But few people know exactly how much it costs to own a car per year.
When asked how much it costs to own a car per year, people quickly think about gas’s cost. It’s natural to think about gas because it is part of daily car use.

Why is the phrase “cars are expensive” common? Well, in addition to the car acquisition cost, there’s gas, insurance, and average maintenance cost per year. Besides, the cost of gas seems to continually increase, which also increases the costs of owning a car.

We can all add these costs but would still not understand exactly how much it really costs to own a car. So, let’s take a detailed look.

Costs Associated With Owning a Car

Calculating the cost of owning your car is the best way to keep your car ownership budget in line. Knowing the total cost of owning a car per month may surprise you. It is expensive, to say the least.

According to AAA, there are seven key costs associated with owning a car, including:

  • Acquisition or financing charges
  • Gas costs
  • Maintenance and repair costs
  • Insurance
  • Depreciation
  • License/Registration/Taxes
  • Tires

According to both the AAA and the Consumer Expenditures in 2020 by the U.S. Bureau of Labor Statistics, owning and operating an average sedan costs $9,576 per year. This cost is equal to around $798 per month or 64 cents per mile. These numbers might shock you, right? No need to because they’re just average figures.

Cost Breakdown Per Year of Owning a Car

Here are cost estimates per year of the cost elements of owning and operating a car that eventually contributes to the total annual car ownership costs. The cost estimations provided here are based on the AAA provision.

The figures we’ve provided here are based on a good driver, a new car (average sedan), and a five-year/75,000-mile limit car ownership period. We understand that, naturally, your car ownership and operation expenses may vary depending on many other factors, such as the method of ownership or distance covered per day, or the nature of roads you use.

Note: We’ve listed these cost elements from least to most expensive based on AAA’s provision and based on individual driving costs.


On average, tires cost $150 per year or $13 per month. It is recommended that you change your tires every three to six years or as soon as the tread depth reaches 4/32 and stopping distances have deteriorated significantly. Replacing tires is important to help you avoid unnecessary accidents like tire bursts.

The expenses of car tires may not be annual, but in the year of a tire change, they contribute to the vehicle’s overall expense. You can include the expenses related to tires in the section of wear and tear or vehicle maintenance in other years.

Finance Charges

Vehicle financing is expensive. The finance charges of an average sedan stand at $685 per year or $58 per month, assuming you purchased your car with a 10% down payment, and a five-year loan. This also assumes that you have average credit. However, this cost will vary depending on the number of years your car is under finance.

Note that there can be a modest increase in financing cost, which you can attribute to increased car prices combined with the higher title, tax, registration, and license fees. These are costs that are typically and traditionally rolled into car financing.


The average combined cost of vehicle registration, taxes, and license stands at $690 per year or $60 per month. But sales prices and local or state tax rates highly affect the registration, taxes, and license costs.

Other than rising vehicle prices, many cities, counties, and states have increased vehicle registration, titling, and licensing fees. For instance, some states include ad valorem/excise taxes, where you are taxed on the depreciated value of your car each year. This will generally increase the vehicle price and eventually increase the cost of car ownership.

Maintenance and Repairs

As per AAA, car maintenance and repairs cost an average of $795 per year or $67 per month. While maintenance costs vary with the car type and age, modest overall increases in car maintenance come from engine motor oils (especially using more expensive semi- or full-synthetic and increasing car repair shop labor rates. Other increases can be associated with increases in extended warranty pricing by car sellers.

Of course, if the older your car gets, the maintenance cost will easily increase or even double. But your maintenance expenses ultimately depend on personal circumstances. For example, your maintenance cost will be low if you take good care of your car, and it can be higher if you live in an area that often experiences harsh weather conditions.

If you often skip or delay recommended auto service, expect your repairs and maintenance costs to be higher in the long run.


In most states, car insurance is a legal requirement, and you are needed to have at least minimal car insurance to own and operate a car. AAA estimates the average cost of insurance to be $1,222 per year or $102 per month – give or take. This is based on a good driver, low-risk with a good driving record.

The figure AAA has given is not static. Insurance rates vary widely with the insurance company, state, driver and driving habits, credit score, geographical area, neighborhood, and vehicle type and condition, among other elements.

You can usually find discounts and savings by comparing car insurance quotes from different insurers. But the savings will not significantly be different from the quoted figure in AAA’s average insurance costs because all insurance companies use the same database for all drivers.


If you know how much you often spend on gas, include that amount in the count.

Otherwise, gas costs an average of $2,156 per year or 22.7 cents per mile. Although this is just an average cost of gas based on national statistics, it represents many people’s gas usage, and it is also one of the key costs of owning and operating a car.

How much you pay for gas each year depends on your car’s miles per gallon, tire condition, road conditions, and gas’s specific price. All these factors vary widely.

Quick Tip: If you don’t know how much you spend on gas, divide the number of miles you drive each month by your car’s fuel economy rating, then multiply that number by the price of a gallon of gas in your area.


Although less talked about, depreciation is the number one expense and cost of owning and operating a car. The depreciation cost of an average sedan is $3,760 per year, $315 per month. This represents more than 40% of the cost of owning a car per year.

The cost of depreciation should come as no surprise, particularly for new cars that experience rapid depreciation in their early years. Depreciation is a real cost that represents the car’s loss in value over its useful life.

On average, as soon as you drive a new car off the lot, it depreciates by 20%, then thereafter it will depreciate roughly by 15% per year. But there are also individual depreciation rates that are based heavily on the car’s make and model, condition, and total mileage, among other factors.

Proper maintenance of the car can reduce its depreciation rate and make it more valuable for credit.

Final Word

Strive to lower your annual driving costs and related car expenses. For example, minimize depreciation by buying a car that historically holds its value and select a car that offers better fuel economy. Since both finance and insurance costs vary with the provider, shop around to find the best rates. Finally, you need to perform all the factory-recommended car repair and maintenance services.