According to the U.S. Bureau of Transportation Statistics, the average cost of total vehicle ownership rose 16% between 2019 and 2022. NerdWallet’s new survey, conducted by Harris Poll, shows that American car owners are feeling the effects of this rising cost.
A study of 2,060 adults in the United States from January 31 to February 2, 2023 found that 25% of Americans worry about how fuel costs and charging will affect their ability to purchase other goods and services.
Cost of vehicle ownership
According to the study, 36% of Americans plan to buy a new car in the next 12 month, despite the fact that vehicle costs can be burdensome for some owners. The average annual percentage rate (or APR) for auto loans for these vehicles is 6.07%. This can increase the cost of vehicle ownership.
NerdWallet found that 43% of vehicle owners consider $1,000 monthly vehicle costs too much. However, 10% of vehicle owners break that threshold. Generation Z and millennials are more likely to have monthly bills exceeding $1,000 than other owners (compared to 6% and 3% for Generation X owners span>).
According to the study, younger generations tend to have higher monthly vehicle costs. The average monthly vehicle bill for Gen Z and millennials is $921, and $821, respectively. Baby boomers, on the other hand, spend $308 per month while Gen Xers spend only $433 each month. According to 35% of Gen Z vehicle owners, vehicle expenses account for a large portion of their monthly budget.
The study also found that parents pay more for their cars. Vehicle owners who have children spend on average $792 per month on their vehicle, while those who don’t have children spend on average $430.
Adding stress to costs
According to the study, 23% of vehicle owners feel stressed by higher costs. 25% of vehicle owners worry about the cost of fueling their vehicle or charging it. This could impact their ability pay for other essential goods and services such as rent or food.
This could be because owners don’t always consider all costs associated with owning a vehicle. It is easy to fixate on your monthly payment, or your vehicle’s price out-of-door. This includes taxes and fees.
Shannon Bradley, NerdWallet’s auto writer, says that what isn’t included at the out-the-door cost “is ongoing ownership costs such as gas, maintenance, and insurance. It’s crucial to budget for these when you plan to purchase a vehicle. ”
Budgeting for your vehicle before buying it is a simple way to avoid getting into a stressful financial situation. Your monthly vehicle expenses will not only include your insurance and loan payments. Gas, maintenance and other expenses will also be included in your monthly vehicle costs.
Shopping around for an auto loan can save you hundreds of dollars. Bradley states, “Reducing a $30,000 60-month auto loan at a rate between 10% and 8% will lower total interest payments over the loan’s life by $1,700 span>
Finally, buying used cars is the best way to save money in the long-term. Our study found that 48% of those who planned to purchase a car within the next 12 month said they would buy a used vehicle; 68% stated they would buy a new car. However, the values are not 100% since respondents could answer multiple questions span>
Automotive pricing guide Kelley Blue Book reported that the average price of a new car was $49,388, and the average price for a used car was $26,510. This is a savings of more than $22,000 that could reduce overall financial stress.
The purchase of a car is similar to other large purchases. It is possible to reduce stress by planning ahead and shopping around before you make a purchase.