OKLAHOMA CITY – If you’re stunned by the cost of a new vehicle, there’s even more to consider than the sticker price.
The latest research from the American Automobile Association (AAA) calculates the average annual cost of owning a new vehicle at $9,666, or $805.50 per month. The analysis was based on data gathered from May 2020 to May 2021.
According to AAA, the biggest factor affecting the annual cost is depreciation – a measure of how quickly a vehicle loses value. That accounted for 40% of expenses. “While we all like that new-car smell … the truth is that new cars depreciate at a quicker rate than used cars,” said Greg Bannon, AAA’s director of automotive engineering and industry relations.
Average fuel costs were set at 10.72 cents per mile, although fuel costs vary widely “from a low of 3.66 cents per mile for electric vehicles to 15.81 cents per mile for pickup trucks,” AAA reported.
Maintenance, repair and tire costs average 9.55 cents per mile, AAA says. Again, electric vehicles are at the lower end of the spectrum at 7.7 cents per mile, while medium sedans are the most expensive at 10.43 cents per mile, AAA estimates.
Finance charges have declined, due to a drop in the prime lending rate. The average interest rate this year is 4.12%, a little over one percentage point lower than last year, AAA said.
“Consumers have to remember, the expense of owning a car goes far beyond the monthly payment,” Bannon said. Also, costs are increasing for “a number of products,” including vehicles, he noted. “This trend will likely continue as new vehicles come equipped with the latest technology, which naturally drives up the sticker price,” Bannon said.
The average price of a new vehicle for 2021 is $32,903, which is $1,502 higher than last year, “mostly due to the addition of new models” to the study, AAA reported.
However, data compiled by car-shopping specialists at Edmunds reported the average transaction price for new vehicles climbed to $40,827 in the second quarter of 2021, compared to $38,895 in the second quarter of 2020.
The 2021 AAA driving cost study examined nine categories of vehicles, a total of 45 models, to determine the average annual operating and ownership costs of each. AAA selected top-selling, mid-priced models and compared them across six expense categories: fuel, maintenance/repair/tire costs, insurance, license/registration/taxes, depreciation, and finance charges.
AAA says its research includes tracking changes in buying patterns. For several years buyers have moved away from previously popular categories, such as sedans, to new styles like compact SUVs. So, for 2021 AAA added two new categories: subcompact SUVs and midsize pickups. These replaced large sedans and minivans, “both of which no longer offer enough new models to be tracked,” AAA explained.
Small sedans, medium sedans, medium SUVs and hybrid categories recorded an average increase in price of $3,064, “led by hybrids as consumers opt for larger (hence more expensive) models in this category,” AAA found.
Pickup trucks experienced an average price increase of $4,684 (or 11%), AAA calculated. However, the sticker price hasn’t affected the popularity of pickups, as they remain the best-selling category of those in the AAA study.
Edmunds, though, reported that the share of pickup trucks slipped from 22% in Q2 of last year to 17.1% in Q2 of this year. SUVs constituted 54.6% of the market, and passenger vehicles made up 23.8% of the market, in Q2 this year.
“Pricey, optioned-out pickup trucks have been the darling of consumers and the primary culprit in boosting the industry average transaction price during the [coronavirus] pandemic, but the well of inventory has run dry,” said Jessica Caldwell, Edmunds’ executive director of insights.
“Consumers who can be more flexible are buying more passenger cars and SUVs, and although they’re paying inflated prices for these vehicles, comparatively they command much less than their truck counterparts.”
Buying a new vehicle is one of the biggest purchases most Americans will make in their lifetime, second only to buying a house.
Consumers seeking bargains in the used-vehicle market may be dismayed by sticker prices for pre-owned vehicles, too, car-shopping specialists at Edmunds warned.
According to the California-based company, the average transaction price (ATP) for used vehicles increased to $25,410 in Q2 of this year – the highest quarterly used ATP in Edmunds’ records – compared to $20,942 in Q2 of last year.
“Tighter inventory and fewer discounts in the new-car market are pushing shoppers to seek a reprieve in the used market, and this is what’s also driving used-car prices to astronomical levels,” Ms. Caldwell said.
Edmunds calculated that the average trade-in value for used vehicles climbed to $21,224 in June 2021 – a 75.6% increase from June 2020.
Analysts at Edmunds contend that car shoppers who are making purchases in the current market likely represent “a more affluent portion” of the population.
“This is not a buying environment for people on the fringe of being able to afford new-car ownership,” Caldwell said. “Average loan terms are already quite long and interest rates are relatively low, on average, so the consumer really has to make up the difference in price.”