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The Expense of Car Ownership

If you opt for an older used car, it’s important to note that it is unlikely to have a manufacturer’s warranty. Therefore, it’s advisable to choose a model with a proven track record of reliability and have a mechanic inspect it before making a purchase.

According to AAA’s 2023 study, the average price of new cars, based on the manufacturer’s suggested retail price, is approximately $35,000, a 4.7 percent increase from the previous year. Additionally, the average annual finance charge has nearly doubled to $1,253, as reported by AAA. The study projects that new cars will depreciate by an average of $4,538 per year over a five-year ownership period, a 24 percent increase compared to 2022.

(The higher depreciation is due to falling used car prices and high new car prices. AAA’s Mr. Brannon explained, “You pay more, but it’s worth less.”)

The report, which utilized information from automotive data researcher Vincentric and other sources, focused on the five most popular 2023 models in nine categories, excluding luxury cars. It estimates the cost of using a new car over a five-year period and 75,000 miles, taking into account expenses such as fuel, maintenance, insurance, license and registration fees, taxes, and depreciation. The analysis does not include the cost of parking, which can significantly add to the overall cost of car ownership, especially in major cities.

Other analyses indicate that the prices of new cars are even higher. According to Kelley Blue Book, a unit of Cox Automotive, the average transaction price for a new car, which reflects the actual amount buyers pay, was around $48,500 in August. This figure remained relatively unchanged compared to the previous year due to increased inventories and incentives such as cash-back rebates. (Kelley Blue Book’s data includes luxury cars, like Audi and Mercedes-Benz, which have experienced price hikes.)

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