There are many costs new car buyers don’t suspect that can push their budgets over the edge. Beyond the initial sticker price, other costs such as registration, taxes, insurance, maintenance, and fuel often go overlooked. This article will explain the many expenses that add to the costs of owning a car and provide tips for lowering those costs.

Average Car Payment Costs

The average monthly payment on a new car was $726 in the third quarter of 2023, according to credit reporting agency Experian. 1 The average monthly payment on a used car was $533 during that same time frame.

Leasing a new car has had an average monthly cost of $540 2  in recent years. While this is less than purchasing a new car, there are often additional fees with leased vehicles, such as charges for exceeding the annual mileage limit. To learn more about owning vs. leasing, read Does It Make Sense to Lease a Vehicle or Own?

Your monthly payment amount is determined by the total price of the car, the term of the loan or lease, the down payment, and the interest rate. For more about average car payment costs, read How Much of a Car Loan Should I Take On?

Insurance

The average amount Washington drivers pay for full coverage car insurance is $128 per month or $1,534 per year, according to Value Penguin 3 .  Washington car insurance premiums increased by 18% in 2024 4 —the second-biggest increase in the nation—mainly due to increased car repair costs and claim volume.

There are many factors that go into the final cost you could pay for car insurance, such as the coverage you select and the type of car you drive, as well as your age, driving record, and location. For example, full coverage insurance will cost more than minimum coverage; EVs and luxury cars are more expensive to insure than gas-powered and economy cars; city-dwellers pay more than rural or small-town residents; and younger drivers and those with a history of traffic violations pay more for insurance than older drivers and those with a clean driving record. Typically, insurance rates see their most significant drops leading up to age 30 and then level off. Check out WECU’s Auto Insurance article to learn more.

Gas

To figure out how much you might spend on gas each year, take the number of miles you’ll drive this year and divide it by your car’s average miles per gallon (MPG), then multiply that by the average gas price.

For instance, with an average of 14,000 6  miles driven per year and a new car that achieves 26 MPG, according to Environmental Protection Agency (EPA) data, you’d use about 538 gallons annually. At the time of this writing, with the average gas price at $3.72 per gallon in Whatcom County 5 , that totals $2,003 per year in gas, or roughly $167 per month.

Your fuel efficiency will largely depend on the type of car you drive and how you drive it. For example, some cars like compact cars and hybrid vehicles will be more fuel efficient, while bigger vehicles like SUVs and trucks tend to be less efficient. Also, freeway driving often increases fuel efficiency in vehicles, while city driving tends to have the opposite effect. Consider these factors when looking into a car that fits both your driving needs and your budget.

Tabs/Registration, Fees & Taxes

When you get a new car, you’ll have to pay for license plates and tabs, and possibly additional fees as well. Common fees include filing fees, service fees, and document fees. The base price for initial tabs and registration at the time of this writing was $43.25 and varies by vehicle weight, location, tax rates, and more. In Washington State, you’ll also have to renew your tabs every year, and the cost varies depending on the vehicle type, plate, and location. To figure out your exact cost, visit https://www.dol.wa.gov/vehicleregistration/fees.html. Taxes associated with the purchase of a vehicle also vary by county and city. While it’s generally possible to roll these taxes into the loan, it’s important to consider that doing so requires you to pay interest on them for the duration of the loan.

Depreciation

Your car loses value each year you own it. This is called depreciation. Depending on the make, model, and year of your vehicle, you’ll see a different amount of depreciation. Usually, new cars lose 20% of their value in the first year, and many cars lose as much as 60% of their original value within the first five years. 7

Kelley Blue Book, Edmunds, and CarFax all offer online tools to help you estimate your car’s value, which you can compare to your purchase price to assess your car’s rate of depreciation. Your car’s age and engine miles are the two biggest factors that determine its rate of depreciation.

If you don’t plan on reselling your vehicle, depreciation will not impact you. Depreciation will also not impact you if you lease a car, unless you plan to purchase the car at the end of your lease. To learn more about owning vs. leasing, read Does It Make Sense to Lease a Vehicle or Own?

Oil Changes

While manufacturer recommendations vary, typically you’ll have to change your oil every 3,000 – 10,000 miles. For the average driver, that means you’ll have to change your oil every 3-6 months. At an average of $50-$100 8 a pop, this can add up.

Repairs & Maintenance

If your car is not under warranty and depending on your insurance and the nature of the repair, you’ll have to pay for most of your car’s repairs by yourself. Whether that’s a set of tires, a timing belt, or windshield wipers, you’ll need to budget for these likely expenses. Here is a list of the most common maintenance items and their average costs, including labor. Keep in mind that these are averages, and actual costs are dependent on a number of factors like the make, model, age, and condition of your vehicle, as well as where you live and what service provider you choose.

  • Brake pads: $115-$370 per axle 9
  • Tires: $45 to $250 per tire9
  • Windshield wipers and fluid: $50-619
  • Transmission fluid: $80-$25010
  • Coolant: $100-$20011
  • Power steering fluid: $172-$20512
  • Belts: $500-$1,10013
  • Air filters: $50-$20014
  • Spark plugs: $100-$50015

Other Hidden Car Ownership Costs

There are other hidden costs of car ownership as well. These include tolls on roadways and ferries, parking fees, roadside assistance premiums (like AAA), radio subscriptions, after-market additions, and more. Some of these costs, like roadside assistance, could end up saving you money on towing services if the need arises, while other costs, like satellite radio, may end up just being extra expenses.

Tips to Reduce the Cost of Car Ownership

While some costs are fixed, there are many ways you can reduce the cost of car ownership. Some of the most common methods are outlined below.

  • Practice fuel-friendly driving habits: Some traffic is unavoidable, but when you can, time your trip to minimize idling in traffic to save on fuel. Save on fuel even further by consolidating trips. Also, practice gentle braking and accelerating to maximize your MPG.
  • Purchase an EV or hybrid vehicle: While EVs and hybrids come with a higher purchase price, charging them is typically less expensive than buying gas, and they often require less maintenance as well. There may be additional fees associated with EVs and hybrids, but these can be offset by lower operational costs.
  • Consider your loan options: The length of your loan will impact how much interest you pay overall. For example, a seven-year loan on a $30,000 vehicle at 7.49% Annual Percentage Rate will equate to $460 payments each month, but you’ll pay $8,640 in interest overall. Conversely, a four-year loan would mean a $725 payment each month, but you’d only pay $4,810 in total interest—and you’d be payment-free three years sooner! Also, putting more money down means less interest paid, as well as a lower monthly payment. Consider interest rates, terms, and other fees that might be associated with the loan before making a purchasing decision.
  • Follow maintenance schedules: It’s generally more expensive to complete a major repair than to prevent it through routine maintenance. Plus, it preserves the condition of your vehicle so you can enjoy more trouble-free miles with it. Follow your manufacturer’s maintenance schedule and choose a service shop that does reputable, reasonably priced work.
  • Shop around for insurance: It’s worth shopping around to find the best insurance deals. Just make sure it’s the coverage you need and nothing less. Bundling with your other insurance needs, such as home owner’s or renter’s insurance, can also help reduce costs. Review your policy or policies regularly to make sure you’re covered adequately at a fair price.
  • Refinance for a lower interest rate: If interest rates have gone down and/or your credit score has gone up, look into refinancing your car loan to see how much money you might save.

It’s not until you have added up all these numbers and compared their cost to your budget that you will be able to assess whether you can afford the vehicle you’re looking at. To learn more about your auto loan options, check out our car loan calculator, or make an appointment to speak to one of our loan officers online or at any of our branch locations.

 

Resources:

  1. “The average amount financed for new and used vehicles decreased in Q3 2023, demonstrating a positive sign for automotive shoppers.” Experian, 30 November 2023, https://www.experianplc.com/newsroom/press-releases/2023/the-average-amount-financed-for-new-and-used-vehicles-decreased-#:~:text=The%20average%20monthly%20payment%20for%20a%20new%20vehicle%20only%20increased,2023%2C%20up%20from%205.26%25. Accessed February 28, 2024.
  2. Zabritski, Melinda. “Leasing Continues to Decline in Q2 2022 Amid Inventory Shortages.” Experian, 7 September 2022, https://www.experian.com/blogs/insights/leasing-continues-to-decline-in-q2-2022-amid-inventory-shortages. Accessed February 28, 2024.
  3. Bishop, Lindsay. “Best Cheap Car Insurance Quotes in Washington (2024).”  Value Penguin, 10 January 2024, https://www.valuepenguin.com/best-cheap-car-insurance-washington. Accessed February 28, 2024.
  4. Timmons, Matt. “State of Auto Insurance in 2024” Value Penguin, 1 February 2024, https://www.valuepenguin.com/state-of-auto-insurance-2024#. Accessed February 28, 2024.
  5. Board, Conner. “Washington car insurance rates expected to increase around 20% this year.” king5, 7 February 2024, https://www.king5.com/article/news/local/washington-car-insurance-rates-expected-increase-around-20-percent-in-2024/281-ab5b0fb7-d76d-4003-a65d-dd2bf161d50c. Accessed February 28, 2024.
  6. “AAA Gas Prices.” AAA, 28 February 2024, https://gasprices.aaa.com/?state=WA. Accessed February 28, 2024.
  7. “Average Miles Driven Per Year by State: Why You Should Care.” Trusted Choice, 3 November 2023, https://www.trustedchoice.com/insurance-articles/wheels-wings-motors/average-miles-driven-per-year. Accessed February 28, 2024.
  8. Hardesty, Chris. “How To Beat Car Depreciation.” Kelly Blue Book, 11 September 2023, https://www.kbb.com/car-advice/how-to-beat-car-depreciation/#what-is-depreciation. Accessed February 28, 2024.
  9. Hunt, Meaghan. “How much is an oil change?” Bankrate, 5 September 2023, https://www.bankrate.com/loans/auto-loans/oil-change-prices. Accessed February 28, 2024.
  10. Betterton, Rebecca. “Average cost of car maintenance.” Bankrate, 5 June 2023, https://www.bankrate.com/loans/auto-loans/average-car-maintenance-costs. Accessed February 28, 2024.
  11. Hawley, Dustin. “How Much Does It Cost To Replace Transmission Fluid?” J.D. Power, 12 July 2023, https://www.jdpower.com/cars/shopping-guides/how-much-does-it-cost-to-replace-transmission-fluid#:~:text=Replacing%20your%20transmission%20fluid%20can%20be%20relatively%20inexpensive%3B%20for%20manual,ranges%20from%20%2480%20to%20%24250. Accessed February 28, 2024.
  12. Kurczewski, Nick. “Is A Car Engine Coolant Flush Necessary?” Carfax, 3 March, 2022, https://www.carfax.com/blog/coolant-flush. Accessed February 28, 2024.
  13. “Power Steering Fluid Flush Costs.” Kelly Blue Book, https://www.kbb.com/service-repair-guide/power-steering-fluid-flush-costs. Accessed February 28, 2024.
  14. Kennedy, Mark. “Timing belt replacement service package and cost.” Professional Automotive Repair, 5 May, 2021, https://www.professionalautorepair.com/timing-belt-replacement-service-package-and-cost#:~:text=The%20cost%20to%20replace%20the,is%20not%20an%20expensive%20part. Accessed February 28, 2024.
  15. “Air filter replacement.” AutoGuru, https://www.autoguru.com.au/repairs/air-filter-  replacement-cost. Accessed February 28, 2024.
  16. Hawley, Dustin. “How Much Does It Cost To Replace Spark Plugs?” J.D. Power, 11 July 2023,      https://www.jdpower.com/cars/shopping-guides/how-much-does-it-cost-to-replace-spark-plugs#:~:text=The%20average%20labor%20cost%20ranges,is%20between%20%24250%20and%20%24500. Accessed 28 February 2024.