Car Ownership Costs Rising Due To Spike In Finance Costs, AAA Study Says
If you plan on buying a new car this year, the cost of car ownership is more expensive than ever. What’s the culprit? High finance costs according to a new car ownership study by AAA.
According to AAA research, the finance costs on a new car jumped 24% in 2019 which makes it the highest new vehicle ownership cost since it began tracking in 1950. AAA determined the average annual cost of vehicle ownership to be $9,282 or $773.50 per month.
“Finance costs accounted for more than 40% of the total increase in average vehicle ownership costs,” said John Nielsen, AAA’s managing director for Automotive Engineering & Repair. “AAA found finance charges rose more sharply in the last 12 months than any major expense associated with owning a vehicle.”
Three major factors in the rising finance costs are:
- 72 Month Car Loans: Each year that’s added to a loan equals on average roughly $1,000 in total finance charges. Going from a 48 or 60 month loan term can mean lower monthly payments but cost you in the long run.
- Rising Federal Interest Rates
- Higher Vehicle Prices
The study attempts to give consumers a look into how much each vehicle category costs annually as well. Here are the annual costs for a new vehicle varies by category type:
New Vehicle Category Annual Cost
Small Sedan $7,114
Small SUV $8,394
Medium Sedan $8,643
Medium SUV $10,265
Large Sedan $10,403
Unsurprisingly, finance charges are not the single biggest cost of vehicle ownership. What is? Depreciation. Depreciation accounts for more than 36% of the average annual cost of ownership. All the more reason to buy a hot rod or truck and fix it up yourself.