4 Tips to Lower the Rising Cost of Car Ownership

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It’s not just the cost of gas that’s going up. The overall cost of driving has also increased this year, AAA says.

Their recently released 2011 Your Driving Costs report [PDF] shows that the cost to own and operate the average sedan has risen 3.4 percent – to $8,776 a year, or 58 cents a mile. For SUVs – the most expensive type of vehicle to own – the cost has jumped to $11,239 a year…

Based on Driving 15,000 miles annually
Small
Sedan
Medium Sedan
Large Sedan
Sedan Average
SUV 4WD
Minivan
Cost Per Mile
45.1 cents
57.3 cents
73.2 cents
58.5 cents
74.9 cents
63.3 cents
Cost Per Year
$6,758
$8,588
$10,982
$8,776
$11,239
$9,489

“Despite seeing reduced costs for maintenance and insurance this year, there is an overall increase in the costs to own and operate a vehicle in the U.S. this year,” said John Nielsen, an AAA director. “The 2011 rise in costs is due to relatively large increases in fuel, tire, and depreciation costs as well as more moderate increases in other areas.”

So let’s break down those last three causes and see if Money Talks News can’t help you drive a little more cheaply than the average motorist…

1. Fuel

  • The cost: About 12.34 cents a mile, a 8.6 percent increase
  • The reason: It’s not what you think – a shortage of oil, or maybe unrest in the Middle East. Today’s rising oil prices are related more to what’s happening in New York than in Libya, as speculators make huge bets on oil prices. Stacy explains it in How Wall Street Wagers Pump up Gas Prices.
  • Our advice: As I explained in this recent story, you have three options: Buy a more fuel-efficient car, try public transportation, or just learn to stretch your gas dollars further. Little things like turning off the A/C, rolling up the windows, and not idling for long stretches can make a noticeable difference. For more tips, be sure to read Stacy’s comprehensive 28 Ways to Save on Gas.

2. Tires

  • The cost: About 0.96 cents a mile, a 15.7 percent increase
  • The reason: “The rise in costs of raw materials, energy, and transportation has led to notable tire price increases in recent years, and 2011 is no exception,” AAA says. “Also contributing to higher average tire costs is a trend by automakers to equip their sedans with premium-grade tires as original equipment.”
  • Our advice: It won’t make your tires themselves any cheaper, but regularly checking your tire pressure and inflating them when needed will increase fuel efficiency and decrease wear and tear. If you don’t know how to check your tires, check out Edmunds’ step-by-step guide.

3. Depreciation

  • The cost: $3,728 a year, a 4.9 percent increase
  • The reason: Depreciation is the gradual loss of your car’s value. So as the price of cars rises, so does the annual depreciation expense. AAA says depreciation is “the largest cost for vehicle owners” – yet is “the most frequently overlooked by consumers determining the cost of owning and operating a vehicle.”
  • Our advice: New cars typically lose 40 percent of their value within the first three years. That’s why it’s best not to buy them. To learn more, check out Stacy’s Why I Don’t Buy New Cars and 8 Tips for Buying a $5,000 Car.

4. Other stuff: Insurance, maintenance, and financing

Insurance and maintenance costs actually declined, according to the 2011 study. But that’s no reason to ignore these expenses. When it comes to insurance, check out our story Understanding, Organizing, and Saving on Car Insurance. As for maintenance, do what you can yourself, and remember that a little preventative maintenance now can save you big repair bills later.

Then there’s financing. According to AAA, the average car owner pays $823 a year in interest. Simple way to bring that cost to zero? Don’t borrow money to buy depreciating assets. Or at least borrow as little as possible and pay it back as soon as possible.

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  • Michael

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