Prices of new vehicles keep getting higher and higher, literally every month. This trend has its major mark on the American Automobile Association’s Your Driving Costs annual study, which brings to light a notable surge in the average cost of owning a new vehicle. The 2023 YDC report reveals that the annual expense of owning and operating a new vehicle has risen substantially, with an average yearly cost of $12,182, translating to a monthly expenditure of $1,015. This marks a significant increase from the previous year, where the average yearly cost was $10,728, or $894 per month.
AAA employs a proprietary methodology to calculate the ownership and operating costs of new vehicles in the United States. The organization gathers data from various sources, including Vincentric LLC, and employs standardized criteria to estimate the expenses associated with using a new vehicle over a five-year ownership period spanning 75,000 miles. While these standardized criteria ensure consistency when comparing different vehicle types, actual costs can vary based on factors such as driving habits, location, and operating conditions.
Back to this year’s results, the driving force behind this dramatic increase in costs can be attributed to a confluence of factors that have shaped the automotive industry in recent times. One of the primary contributors to the augmented expenses is the upsurge in the average manufacturer’s suggested retail price (MSRP) of new vehicles, which has reached $34,876 in the 2023 YDC study. This figure represents a 4.7 percent increase from the previous year’s MSRP, amounting to a $1,575 uptick.
It’s crucial to note that the MSRP doesn’t necessarily align with the actual purchase price, as it can fluctuate based on demand and market dynamics. Nevertheless, the higher MSRP directly impacts finance costs, with the average annual finance charge for this year’s vehicles standing at $1,253. This big number signifies a remarkable 90 percent surge from the previous year’s figures.
Other factors that contribute include depreciation, which is the decline in a car’s value over time. AAA anticipates that new vehicles will depreciate by an average of $4,538 each year over a five-year ownership period. This marks a 24 percent increase compared to the prior year. Also, the fact that most of the automakers have focused on producing larger, more luxurious, and feature-rich vehicles, drives up the prices of new models, respectively the annual new car ownership costs go up.
While fuel expenses emerged as a significant cost category in the previous year, the 2023 YDC report demonstrates a modest decrease of around 2 cents per mile in the average cost per mile for fuel. Notably, the cost of charging electric vehicles (EVs) has seen an opposite trend, rising by nearly 2 cents per kilowatt-hour from 13.9 cents per kWh to 15.8 cents per kWh. This increase is attributed to higher-than-expected inflation, as stated by the US Energy Information Administration (EIA).