It's no surprise buying a new car has become increasingly more expensive for many buyers, but a new study puts hard numbers on the rising costs.
AAA released its latest car ownership cost study last Thursday and noted that costs have reached record highs. Why the spike? Finance costs.
It's worth noting that costs increased in every single category AAA surveys in its study: fuel prices, maintenance/repair/tire costs, insurance rates, license/registration/taxes, depreciation and finance charges. The final category was responsible for most of the increases, however.
This year, the cost to finance a car rose $200 in the past year and accounted for more than 40% of the rise in ownership costs total. Finance charges jumped from $744 to $920 due to higher federal interest rates and overall higher new-car prices. It's no wonder used cars are becoming incredibly popular with buyers. Often, they pack a lot of the same features as new cars, but don't carry the high price tags.
AAA also found more Americans are turning to 72-month financing to stretch their way to cheaper monthly payments. While the figure looks good up front, it costs a lot more money in the long term. Every 12 months of a loan added roughly $1,000 to finance charges, according to the study.
Yet, of the ownership costs, depreciation remains the highest cost factor. Although it slowed this year, it still accounted for 36% of annual costs. The average new car lost $3,334 in value over the past year. Depreciation costs, surprisingly, dropped for small and medium sedans.
On average, fuel costs also increased by 5% to 11.6 cents per mile, and maintenance costs rose 8.9% 8.94 cents per mile. Electric cars have the lowest maintenance costs at 6.6 cents per mile.
Like many Americans, if you're interested in buying a new pickup truck, know it costs the most to own in a single year at $10,839. The cheapest type of vehicle to own remains a small sedan at $7,114 per year. There's a lot one can do with a nearly $4,000 extra a year.