The American Automobile Association’s (AAA) annual Your Driving Costs (YDC) study reveals a notable increase in the average cost of owning a new vehicle. The 2023 report indicates that the annual expense has risen substantially, with an average yearly cost of $12,182, or $1,015 per month. This marks a significant jump from the previous year’s average of $10,728, or $894 per month.

To calculate the ownership and operating costs of new vehicles in the United States, AAA uses a proprietary methodology that incorporates data from various sources and standardized criteria. The study estimates the expenses over a five-year ownership period and 75,000 miles of driving. However, actual costs may vary based on factors such as driving habits, location, and operating conditions.

Several factors have contributed to the increase in costs of owning a new vehicle. One primary factor is the rise in the average manufacturer’s suggested retail price (MSRP) of new vehicles, which reached $34,876 in the 2023 YDC study. This represents a 4.7 percent increase from the previous year, amounting to a $1,575 uptick.

It’s important to note that the MSRP may not reflect the actual purchase price, as it can fluctuate based on demand and market dynamics. However, the higher MSRP directly impacts finance costs, with the average annual finance charge for this year’s vehicles standing at $1,253. This signifies a significant 90 percent increase from the previous year.

Depreciation is another contributing factor, reflecting 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. Additionally, the focus on producing larger, more luxurious, and feature-rich vehicles by automakers drives up the prices of new models, thereby increasing annual new car ownership costs.

In terms of fuel expenses, the average cost per mile for fuel has experienced a modest decrease of around 2 cents per mile compared to the previous year. However, 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 noted by the US Energy Information Administration (EIA).