Uncover the Truth About Rising Car Ownership Costs

Why Cars Are So Expensive Now

Car ownership has been severely impacted by rising inflation in recent years. For most Americans, cars are not just a luxury but a necessity for daily life. The Bureau of Labor Statistics data reveals the three biggest costs of car ownership: vehicle purchases (net outlay) at $5,539 (46% of overall cost), gas, other fuels, and motor oil at $2,694 (22% of overall cost), and auto insurance at $1,775 (15% of overall cost). While buying a lower-priced car seems like an obvious solution, it's not always feasible. New cars keep getting more expensive with advanced features, and used cars may not be readily available. The price of gas is also unpredictable, influenced by global economic fluctuations. Even hybrid or electric vehicles may not always be cheaper.

However, one thing drivers can do to lower costs is shop around for car insurance. Different companies offer varying rates, and by comparing options, drivers can find better deals. Click here to explore our curated list of the best car insurance companies and learn how to save on auto insurance.

Good News: Cars Might Get More Affordable Soon

The U.S. auto market is constantly evolving. Recent data from Kelley Blue Book shows that new cars became more affordable in October 2024. The average new car sold for $48,623, but Americans' average wages have also increased. Kelley Blue Book indicates that the average American would need to work 37.4 weeks to pay off the average new car sale price, which is better affordability than seen since August 2021. The auto market may be becoming more customer-friendly, especially for those with good credit scores.

One reason for this is the potential for lower auto loan rates. In September and November, the Federal Reserve announced rate cuts totaling 0.75%. These cuts will lead to a decrease in auto loan interest rates. While it may not happen immediately for every car buyer, for those with good credit buying a newer vehicle, auto loan APRs might start to fall by the end of 2024 and into 2025. Some of the best auto loans currently offer 6% APR (or lower) for qualified borrowers. Improving one's credit score can lead to significant savings on car loans, potentially saving hundreds or even thousands of dollars over time.

Bottom Line

Owning a car is now shockingly expensive for many Americans. While the sale price of new cars, gas costs, and some aspects of auto insurance rates are beyond our control, drivers still have options. To cut car ownership costs, start by shopping around for better car insurance prices. And to save on auto loan interest for future purchases, work on boosting your credit score before entering the market for a new (or used) vehicle. By taking these steps, drivers can better manage the financial burden of car ownership.