In the US, it is increasingly becoming a luxury being able to own a car. According to the AAA research agency, the average new car price costs nearly $40,000 nowadays. The agency also reveals that the average American owner must spend approximately $9,282 per year on their vehicle, which equals $773.50 a month, which is considerably higher than last year’s $8,849.
Considering that the average man earns a median salary of $52,208 annually, while women earn $41,912, according to the Bureau of Labor Statistics, splurging on a new car is not an option for many Americans. There are a number of factors that account for the rising prices of car ownership. Mostly, consumers are choosing larger trucks and SUVs rather than smaller and more affordable cars.
In addition, trucks and SUVs are generally more costly to maintain and insure. Expenses vary depending on the vehicle segment. Pickups are the most expensive vehicles to own with annual cost of $10,839, while small sedans cost $7,114 per year to own.
Financial costs are also a factor with rising interest rates and longer loan and lease periods. The average finance charges add up to $920 a month, up from $744 in 2018. Meanwhile, depreciation accounts for about 36 percent of the average annual cost of ownership with an average of $3,334 per year.
“Finance costs accounted for more than 40 percent of the total increase in average vehicle ownership costs,” John Nielsen, AAA’s managing director for Automotive Engineering & Repair, said. “AAA found finance charges rose more sharply in the last 12 months than any major expense associated with owning a vehicle.”
The AAA report reminds American that new cars, much like homes, school and kids, require long-term planning beyond a dealership's monthly price. Used cars are always much more affordable. The average new car costs nearly $40,000, according to Kelley Blue Book, while the average used car price is around $20,000.
Unhealthy And Expensive - The Downward Spiral Of New Car Ownership https://t.co/Edd3rPQfdO— MultiMillionaireRoad (@millionairer0ad) September 10, 2019
Add to that the cost of financing the higher vehicle price, and the greater auto insurance costs for the higher-value vehicles, and buying a new car is much more expensive. Also, when the warranty coverage runs out on a new car, the advanced technology in newer vehicles makes them more expensive to repair.
Finally, depreciation is very straightforward. If you buy the car for $30,000 and sell it three years later for $15,000, you’ve lost $15,000. If you buy the same but it's 3 years old at the time, you’ll spend $15,000 and certainly not lose $15,000 if you maintain it and sell it within a reasonable amount of time.