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New Cars Lose $3,000 Annually From This Single Expense, AAA Says

AAA has announced the single largest expense associated with purchasing a new car.
AAA has announced the single largest expense associated with purchasing a new car. Photo Credit: AAA

When purchasing a new car, one considers many things: is it reliable? How is the gas mileage? How much does it cost? What will the upkeep be?

However, many would-be car buyers are failing to factor in the larges expense associated with purchasing a new ride: depreciation, according to AAA.

AAA’s “Your Driving Costs” study found that the largest expense associated with purchasing a new vehicle is depreciation, which accounts for nearly 40 percent of the cost of owning a new car - more than $3,000 a year - and is influenced by a number of factors.

“New vehicles offer the latest designs, cutting-edge technologies and warranties that offer peace of mind,” AAA Managing Director of Automotive Engineering and Repair John Nielsen noted. “But, car owners that like to change vehicles frequently should be thinking about the resale value – not just the purchase price – when choosing their next ride.”

According to AAA, buyers tend to only give priority to purchase price and monthly payment when choosing a new car, sometimes selecting a vehicle based on the best deal available. The length of car ownership, however, is of equal importance.

“Consumers who plan to keep a vehicle for only a few years should be cautious of deep discounts and incentives offered by automakers and dealers,” AAA officials noted. “These are often designed to sell less popular models and directly influence depreciation. Low down payments and extended finance terms can also have a similar effect. Stretching a car loan over five, six or even seven years may be an effective way to lower payments, but owners may quickly find themselves owing more than the vehicle is worth.”

The 2018 “Your Driving Costs” study found the average cost to own and operate a new vehicle this year will be $8,849 per year, which was calculated based on the cost of fuel, maintenance, repairs, insurance, taxes, loan interest and depreciation.

Small sedans have the lowest annual cost ($6,777), while pickup trucks come in at the highest annual cost to own a new vehicle ($10, 215).

“While the latest technology, style and options make them attractive to car buyers, a new car may not be the most economical choice for some buyers,” AAA officials stated. Vehicle owners looking for alternatives to new car ownership or ways to minimize their operating costs can consider the following tips from AAA:

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