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    Totaling it Up: The True Cost to Drive Your Car

    Key Summary
    The true cost to driving your car can include the following factors: financing, depreciation, maintenance and repair, insurance, and your driving habits. Learning how to save on these costs can make all the difference.

     

    As every car owner knows, cars are expensive to run. According to the 2021 edition of the AAA's "Your Driving Costs," you could drive a small sedan 15,000 miles a year for 48 cents per mile. The cost can reach 66 cents per mile if you put 15,000 miles on a four-wheel drive. That's an annual cost of $9,900. And that's just the beginning of your annual costs. Many factors feed into the cost of driving: financing, depreciation, repairs and maintenance, insurance, and driving habits. Let's take a look at how you can save on these costs.

    Financing

    Credit unions often offer the best rates on new car and used car loans, according to data from Datatrac—with an average of 48-month loans more than one percentage point lower in each category. But loan rates alone do not tell the whole story. On a 60-month, $20,000 loan, the monthly payment would be $378 at 5% and $387 at 6% — not much difference. A meaningful comparison must include other factors, like loan terms, fees, and prepayment penalties. If the dealer offers a rebate or low-rate loan, don't automatically accept a low-rate loan. Use this calculator to determine whether the low-interest rate or the rebate is the better offer for your situation.

    Depreciation

    Depreciation happens after the salesperson hands you the keys and you drive off the dealers' lot. Even before your new-car joyride is over, your car has lost value. The rate of loss can be considerable. In fact, AAA estimates the average annual depreciation on 20% to 30% by the end of the first year.

    Maintenance and Repair

    You're going to need to keep your car in top shape, which isn't cheap. AAA estimates the maintenance costs of sedans at about nine cents per mile.

    Insurance

    The insurance expense for the average sedan with full coverage is about $1,555 per year, which would cover a driver with a good record and good credit. Drivers who are male, younger than age 25, poor students, or have a record of moving violations and/or accidents are more expensive. Drivers who combine several of these drawbacks find insurance the most expensive. Regional factors can matter: Big-city rates tend to be much higher than rural ones. Raising the deductible and reducing the maximum coverage on the policy can lower premiums substantially, but both options also increase your risk. Make sure to ask about discounts for multiple cars, good driving records, lower annual mileage, and good grades (for students).

    Driving Habits

    The way you drive can make a huge difference in overall costs as well.

    • Drive safely. Accidents always cost money, even if you're insured, and you'll be lucky if the consequences are limited to finances. Drive defensively and try to stay off the road late at night when accidents are most common.
    • Keep tires inflated. This improves mileage, preserves tires, and decreases the chance of a dangerous blowout. Inflation pressures should be listed on the sticker inside the glove box, or in the owner's manual.
    • Drive mild, not wild. By accelerating slowly and coasting up to stoplights, you can save as much as 40% in fuel consumption. The higher your speed, the more fuel you will burn.
    • Use cruise control. Tests showed a 4% to 14% improvement in mileage from this simple step. It may also prevent the dangerous speed creep that can lead to a costly speeding ticket, which may, in turn, increase your insurance costs.
    • Drive less. This will reduce costs for gas, oil, maintenance, and depreciation.
    • Don't drive. Think about carpooling, taking public transit, biking, or walking. After all, a gallon saved is $3 or more earned—and remember, fuel is only a small fraction of the overall cost of driving.

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