Image of couple posing in front of new car.

The True Cost Of Owning A Car

Miranda Crace7-Minute Read
UPDATED: February 29, 2024


Owning a car comes with a lot of new and unexpected costs. Whether you’re a seasoned lessee looking to swap a lease agreement for an official car title or are finally trading in your parents’ hand-me-down clunker for your first "adult" car, you need to make sure you’re financially prepared for having your own set of wheels.

If you’re thinking about buying a car, read on to learn about the true cost of car ownership and some of the things you’ll need to budget for in its first year and beyond.

The Cost Of Buying

According to Kelley Blue Book, new cars can cost anywhere from $20,000 to $55,000, depending on the car size and type. If you get a used car, you’ll likely be able to find something cheaper. However, keep in mind that the sticker price isn’t the only thing you’ll pay before the car is rightfully yours.

In addition to the cost of the car, purchasing a car comes with you paying extra fees. This includes sales tax, registration costs and various dealership fees.

The cost to register your car with your state’s motor vehicle authority will depend, as each state has its own rules and sets its own prices for these fees. You’ll need to buy a vehicle registration, a title transfer and a license plate. This could end up costing less than $50 or more than $100.

Your dealership may also have a few of its own fees listed on your bill. If you don’t understand what any of them mean, ask. One of the most common is the documentation fee, which is what the dealer charges for completing all the paperwork related to the purchase. This is normally a few hundred dollars, but you can check to see if your state has a legal limit about how much a dealer can charge for this.

Financing Vs. Cash

As you prepare to buy a car, you’ll need to decide whether you’ll do so using a loan or by paying the full price out of pocket. If you have enough saved up that it won’t put you in a financially problematic situation to buy the car without financing, that may be your best option.

If you don’t have that kind of money saved up or you’d rather use your saved funds for other things, you can start looking into loan options and see what kinds of interest rates are available.

Rates depend on the person and vehicle, but the average monthly payment on a new car is $550; for used cars, it’s $392, according to the most recent quarterly State of the Automotive Finance Market report from Experian™.

New Vs. Used

Deciding on whether to buy a new or used car will play a big part in dictating how much money you end up spending, both up front and over the course of car ownership.

Obviously, new cars are more expensive than their used counterparts. They also depreciate in value faster than used cars. According to Carfax, a car can lose more than 10% of its value in the first month after you drive it home.

However, you can also usually get a better interest rate for an auto loan on a new car – some dealerships even have special, 0% financing offers for new cars. And the new car might cost you less in repairs throughout the first few years you own it.

If you don’t want to spend a lot of money on a new car, you can find used cars that are just as reliable and much more affordable. You want to look for a car that is in good condition, has been well-maintained and has a reasonable number of miles for its age.

Car Owner Annual Costs

Remember that buying a car isn’t a one-time deal for your wallet.

Obviously, if you chose to finance your car, you’ll have a loan that you’ll need to pay off. But you’ll also have a whole bunch of other year-to-year costs you’ll have to deal with.

According to AAA, the average annual cost of vehicle ownership is $9,202, or $773.50 per month. Here are the basic components behind that annual ownership cost amount:


Almost every state requires you to have some form of car insurance, and the cost can vary depending on where you live, what kind of car you drive, your driving record, how old you are and even your credit score (although three states – Massachusetts, California and Hawaii – prohibit this practice).

Americans pay $1,457 on average for their annual car insurance premiums, according to’s analysis. Although, costs again depend on the state you’re in. For example, as a result of state-mandated, unlimited lifetime medical benefit coverage, Michiganders pay $2,611 for auto insurance, the highest in the country, and a little over $300 higher than the next-highest state average: $2,298 in Louisiana. The cheapest state is Maine, where residents pay an annual average of just $845.

In addition to insurance, you’ll also have to renew your car’s registration every so often – annual registration is typical, but some states allow for multiyear registration. The cost for this will, again, depend on the state you live in.


To keep your car running, you’ll need to have regular maintenance done. This includes oil changes, tire rotations, and making sure everything is working smoothly and nothing needs replacing (or replacing it if it does).

The conventional advice is to get your oil changed every 5,000 miles, but many of today’s cars can go well past that before needing a change. Consult the owner’s manual to find out your car’s frequency. An oil change generally costs somewhere between $50 to $100, depending on the type of oil you use.

Generally speaking, tires get rotated every 6 months or so. If not, go by what's recommended in your owner’s manual. Some places will do tire rotation for free, particularly if it’s the place you bought your tires from. Otherwise, it typically will cost less than $50, depending on where you go.

There are also little things along the way that you can do yourself. This include replacing light bulbs when they go out, adding fluids as needed, changing the windshield wiper blades, and putting air into your tires. These are generally smaller expenses, but still useful to keep in mind.


Well to make your car go, you gotta give it gas.

How much a person spends on gas annually is highly a person-by-person case – the amount you’ll need to budget for gas will depend on how much you drive. Someone who works close to home or rarely needs to drive far could spend less than $1,000 per year on gas, while a heavy commuter could easily spend over $2,000. You can use an online calculator to help you figure out what your average is.

Unexpected Costs

As a car owner, you’ll eventually encounter the situation every car owner fears – it starts as a weird noise, a leaking fluid or an unexplained "check engine" light, and it means one thing: you need to take it to a mechanic.

Getting your car repaired when something is wrong with it can cost anywhere from a few hundred dollars to several thousand. That’s why it’s always a good idea to keep a chunk of money tucked away in an emergency fund in case something goes wrong with your car that requires a pricey repair. If you don’t have an emergency fund, consider a personal loan to help get your car back on the road and using our simple loan calculator to decide what loan amount is right for you.

You should also keep in mind that there are things that can happen that will cause your insurance premium to rise, meaning you’ll have to budget more. This can include things like receiving a speeding ticket or being involved in a fender bender (sometimes even if you weren’t at fault).

Thoughts To Consider Down the Road...

Throughout the years of driving your car, it’ll take on wear and tear. As cars age in miles, not years, and the more miles a car has, the more TLC it’s likely going to need.

Tires need replacing once they are about 6 years old. You can usually expect to pay $400 to $800 for a new set. Your battery will need replacing every few years, and can cost between $60 and $120. Brake pads will generally need replacing after around 35,000 to 60,000 miles, for around $200 to $600. Your brake rotors and calipers will generally last longer than the brake pads, but will need replacing at some point as well. A full brake job including pads, rotors and calipers generally starts around $300 and can cost upwards of $1,000.

As your car gets older, you may wonder if it makes more sense to buy a new one or keep maintaining and repairing the one you have. This will depend on the car's condition, your comfort and what it would cost you to buy a new one. If you buy a new car, remember you’ll be able to trade in your current car to put toward some of the cost of the new one.

However, you should take into account whether the cost of financing the new car outweighs the cost of simply making repairs. Many cars run great, take us on adventures, and have few problems well past the 100,000 mile mark, with some even making it past 200,000. Ultimately, you should do what you think makes the most sense for you and your auto financial situation to keep everything running smoothly down the road.

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Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years.