Owning a car in the U.S. is expensive and will likely be your second biggest expense after housing. To save money, always use public transportation as a primary source of transportation. If you do not have access to public transportation and must buy a car, it is important to understand the expenses involved in owning a car in the U.S.
Loans and Payments
The average cost of a new car in 2022 in the U.S. is reported to be about $48,000 and for a used car about $35,000. Most car owners will provide an initial cash down payment of 10-20% of the car’s cost, after which they then have a monthly loan payment. In 2022, the average monthly loan payment in the U.S. on a new car is about $700 a month and $500 for a used car. On top of that, almost every state charges sales tax on the purchase of a car. Though it varies by state, the average state sales tax in 2022 is around 6% of the car’s purchase price.
Insurance will most likely be the second biggest expense in owning a car. In the U.S., the cost of insurance can vary widely depending upon the state, your driving record and the amount of insurance coverage purchased. In 2022, average insurance payments across U.S. states range between about $900 and $1600 a year.
Repairs and Maintenance
You will have to spend money to maintain your car, from oil changes to tire replacements to windshield wiper replacements. If your car doesn’t have a warranty, unexpected major repairs can cost thousands of dollars plus the cost of towing it to a mechanic. If it does have a warranty, you will be responsible for the cost of repairs when the warranty expires.
If your car runs on gasoline, you will have to keep your tank filled. The price of gasoline goes up and down, but during 2022 it has averaged as high as $5 per gallon in the U.S. To get a better idea of how much you might spend on gasoline, if your car gets 20 miles to the gallon, at $5 per gallon, it will cost $25 in gas to drive 100 miles.
Registering Your Car
You will have to pay for license plates, title (a document that proves you are the owner of the car) and registering the car annually in your state. Depending on the state, registration fees range from around $20 to $225 a year. In some states, fees can also depend on factors like the age, weight, or the value of the car.
To make sure your car is in good operating condition and meets air pollution standards, almost every state in the U.S. requires that you pay an annual inspection fee. State inspection fees across the U.S. average around $35 a year. If you fail inspection, you will have to spend money to fix the problem and sometimes pay another fee to verify that it is fixed.
Driver’s License Fees
You will have to pay for a driver’s license, and you may also have to pay for driving school in preparation for a road test. Depending on the state, driver’s licenses are generally valid for around 4-8 years, and then they must be renewed for a fee. But the initial cost across states averages around $50.
There will be times when you will pay for parking. If you park illegally, you may receive a ticket and be required to pay a fine. Some apartment buildings also charge residents for parking.
Tolls and Fees
In many parts of the U.S., you must pay to use roads and bridges. And, to reduce traffic and pollution, some cities in the U.S. are currently proposing “congestion pricing,” where you must pay a fee to drive in a city. One such proposal in New York City would charge a driver $23 each time they drove into the central business district during peak hours.
Auto Property Taxes
About half the states in the U.S. now charge taxes each year based on the value of your car. If you live in a state with car property taxes, for a car valued at $25,000, the tax could range from $25 a year (Louisiana) to as much as $1023 a year (Virginia).
Remember: as a rule, you should not spend more than 15-20% of your take-home household income on the total expenses of owning the car. If it is an option, living near reliable public transportation and occasionally renting a car, using car share, and biking or walking are choices that can help you live a more financially responsible and less stressful life.