(WWJ) -- It costs quite a bit to own a car these days.
The latest numbers from AAA Michigan show the average annual cost of new vehicle ownership is $9,666, or $805.50 per month.
AAA says the biggest factor pushing the nearly $10,000 price tag is depreciation, which accounts for 40% of all ownership expenses outpacing additional costs like fuel and maintenance.
With low inventory at dealerships across the country, due to the global semi-conductor chip shortage, AAA is urging new car buyers to be aware of all the expenses associated with ownership “so that they can negotiate the best deal for their budget.”
“Consumers have to remember the expense of owning a car goes far beyond the monthly payment,” said Greg Brannon, AAA’s director of automotive engineering and industry relations.
Brannon says the rising prices are likely here to stay for a while.
“Plus, we are seeing costs increase for a number of products recently, and cars are no exception. This trend will likely continue as new vehicles come equipped with the latest technology, which naturally drives up the sticker price.”
AAA conducted the 2021 “Your Driving Cost Study,” reviewing nine categories of cars -- including 45 models -- to determine the average annual operating and ownership costs of each.
The study selects top-selling, mid-priced models and compares them across six expense categories: fuel, maintenance/repair/tire costs, insurance, license/registration/taxes, depreciation and finance charges, with depreciation remaining the single biggest cost of new vehicle ownership, at 40%.
Here are some of the key findings in AAA’s “Your Driving Costs” study:
-- Fuel Costs: on average, fuel costs 10.72 cents per mile, based on data from May 2020-May 2021. This is based on data from May 2020 – May 2021, which does not include recent spikes in gas prices. Fuel costs vary widely by vehicle type, ranging from a low of 3.66 cents per mile for electric vehicles, to 15.81 cents per mile for pickup trucks.
-- Maintenance, repair and tire costs: on average, maintenance and repair costs 9.55 cents per mile. Just like fuel, electric vehicles are on the lower end of the spectrum, costing 7.70 cents per mile, while medium sedans are the most expensive at 10.43 cents per mile.
-- Finance charges: the cost of vehicle loans decreased due to a drop in the prime lending rate. The average interest rate in 2021 is 4.12%, which is 1.056 percentage points lower than last year.
AAA has also been tracking buying patterns as part of the study, saying they’ve seen for several years now that buyers are moving away from previously popular categories like sedans to newer styles like compact SUVs. In 2021, AAA replaced sedans and minivans with subcompact SUVs and midsize pickup trucks, saying the former no longer offer enough new models to be tracked.
The average price of a new vehicle in 2021 is $32,903, which is $1,502 (4.78%) higher than last year, but is mostly due to the addition of new models to the Your Driving Costs study, AAA says.
Models in the small sedan, medium sedan, medium SUV and hybrid categories averaged an increase in vehicle price of $3,064, led by hybrids as consumers opt for larger (hence more expensive) models in this category.
Pickup trucks, meanwhile, saw an 11% increase of $4,684, but AAA says that increase has not affected their popularity, as pickups remain the best-selling category of all categories included in the study.
Buying a car is the second biggest purchase behind a home that most people will make in their lifetime, AAA says, and it can be a process seen as difficult, time-consuming and stressful.
“With strains on inventory this year, it is critical for consumers to do as much research as possible before beginning the buying process, “ AAA spokeswoman Adrienne Woodland said. “Understanding all of the options available as well as individual needs can ease some of the anxiety associated with purchasing a car.”
AAA offers the following guidance when it comes to shopping for your next vehicle:
-- Before considering any specific makes or models, consumers should determine what makes sense for their budget including trade-in value and down payment amount.
--Another important consideration is whether to finance or lease. For someone who is an early adopter of new technology, likes to change cars often or doesn’t put a lot of annual miles on a vehicle, leasing may make more sense. Consumers should evaluate both options and pick the one that will best suit long-term needs.
-- Manufacturers and dealerships sometimes offer extended loan terms as an incentive to buyers. In some cases, these loans can be as long as 84 months with interest as low as zero. Initially, a loan like this may be attractive to a buyer since it helps lower the monthly payment. However, consumers should know that with long-term loans comes a period of time when the vehicle will hold less value than what is owed due to depreciation.
-- Look at pricing options for both new and slightly used vehicles. New vehicles typically come with longer warranties, buying incentives from the automaker, the latest features and are widely available. When it comes to used vehicles – there are two types to choose from – certified pre-owned and used. The advantage of a certified pre-owned vehicle is the original owner has absorbed the majority of the depreciation cost, while the vehicle still has quite a few of the latest features and a manufacturer’s warranty.
-- Consumers should test drive the exact model of the car they want to purchase. If possible, they should pick a route that mirrors their daily driving routine. It is a good idea to test the car’s ride quality and handling on a number of different road surfaces: city streets, hills, freeways and winding roads.
-- The most important thing to remember is in most cases, there are three separate negotiations that occur when purchasing a car: the price of the new vehicle, trade-in value and finance rate if applicable. Consumer should take their time and negotiate them individually.
AAA offers a way for consumers to calculate their annual driving cost through their digital brochure on Newsroom.AAA.com, as well as other car guides and car buying programs.