The average cost of owning a car has increased by almost 50% in the last decade. Here’s what you need to know:

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If you feel like driving is more expensive than ever, you’re not alone. The costs of car ownership – including car insurance – have risen dramatically in recent years. According to a study by Motley Fool Money, the average cost of owning a car in 2023 was $12,078. Just 10 years earlier, in 2013, car ownership cost just $8,467.

This means that the cost of owning a car has increased by 43% over the last 10 years.

Let’s look at what the rising cost of car ownership means for your bank account – and see how to find the best car insurance and car loan deals in 2025.

Why cars are so expensive now

Owning a car is one of the areas of American life that has been hit hardest by rising inflation in recent years. Most Americans not only own cars, but also need them to get to work, school, shopping, and more. So it’s no wonder that the high costs of car ownership can be particularly painful.

Here they are three biggest costs of car ownership, According to the Bureau of Labor Statistics:

1. Vehicle purchases (net expenses): $5,539 (46% of total cost)

2. Gas, other fuels and motor oil: $2,694 (22% of total cost)

3. Car insurance: $1,775 (15% of total cost)

For drivers looking to reduce the cost of car ownership, the obvious answer is to buy a cheaper car. But that’s not always an easy option. New cars with extended features are becoming increasingly expensive and cheaper used cars are not always available. The price of gas is also beyond our control as it may rise or fall due to fluctuations in the global economy. And owning a hybrid or electric vehicle isn’t always cheaper.

But here’s one thing, the drivers may What you can do to reduce the cost of car ownership: Shop for car insurance. Click here to view our curated list of the best car insurance companies – and learn how different companies can offer lower car insurance rates.

Good news: Cars could soon become more affordable

The U.S. automotive market is constantly changing as auto companies try to make a profit and customers decide when to buy new vehicles and when to leave the dealership. Just because the cost of owning a car has increased by almost 50% in the last decade doesn’t mean cars will remain unaffordable forever.

Recent data from Kelley Blue Book found that new cars became more affordable in October 2024. Both prices and the time it takes to pay off an average car are taken into account.

The average new car sold for $48,623 in October — that’s a lot of money, but Americans’ average wages have also increased. Kelley Blue Book says the average American would have to work 37.4 weeks to pay off the average new car sales price. That’s better affordability than America has seen since August 2021.

The US car market could become a little more customer-friendly, especially for drivers with good credit. This is because interest rates on car loans could also fall.

Fed rate cuts = cheaper car loan rates

In September and November of this year, the Federal Reserve announced interest rate cuts totaling 0.75%. These rate cuts will cause auto loan interest rates to drop. This may not be the case for every car buyer. But for people with good credit who buy a newer vehicle, car loan APRs could drop starting in late 2024 and continuing into 2025.

Some of today’s best car loans offer an APR of 6% (or less) for qualified borrowers. If you want to reduce the cost of owning a car, you should first improve your credit score. A better credit score can help save hundreds of dollars per year or thousands of dollars overall on car loan costs.

Conclusion

Owning a car has become shockingly expensive for many Americans. But even though the selling price of new cars, the cost of gas, and some aspects of car insurance rates are beyond our control, drivers still have choices.

To reduce the cost of car ownership, start by looking for cheaper car insurance prices. And to save on car loan interest on future car purchases, try to improve your credit score before committing to a new (or used) vehicle.

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