The cost of purchasing a car may rapidly build up, and many individuals are unprepared for the financial shock.

According to the US Bureau of Transportation Statistics, the average cost of total automobile ownership in the United States increased 16% from 2019 to 2022. According to a recent NerdWallet survey performed by The Harris Poll, this cost is taking a toll on American car owners.

According to the poll, which was conducted among 2,060 U.S. adults from January 31 to February 2, 2023, 25% of Americans who own a personal car are concerned that the cost of fuelling or charging their vehicle would damage their capacity to pay for other important products or services.

Vehicle Ownership Costs

Despite the fact that car expenses are dragging on some owners, the poll found that about one-third (36%) of Americans want to acquire a new vehicle in the next 12 months. The average annual percentage rate — or APR, the interest payable on a car loan — for those automobiles is 6.07%. This can contribute to an increase in the overall cost of car ownership.

According to NerdWallet, while 43% of car owners believe $1,000 in monthly vehicle expenditures is too much for them to bear, a minority – 10% of owners — break over that barrier. Owners of Generation Z and millennials are more likely than others to have monthly costs in excess of $1,000 (20% and 18%, respectively, compared to 6% of Generation X owners and 3% of baby boomers).

According to the survey, younger generations have greater overall monthly automobile costs. Vehicle owners in Generation Z and Generation Y spend $921 and $821 per month, respectively, on their automobiles. Baby boomers pay $308 each month, whereas Gen Xers spend $433. As a result, 35% of Gen Z car owners say vehicle expenditures account for a sizable amount of their monthly budgets.

According to the survey, parents also spend extra for their automobiles. Automobile owners with children spend an average of $792 per month on their cars, while those without children pay $430.

Cost Pressures Are Increasing

According to the report, larger costs generate more worry for vehicle owners, with 23% admitting the cost of ownership causes them concern. One-quarter (25%) of all car owners are concerned that the cost of fuelling or charging their vehicle would damage their capacity to pay for other necessities such as rent, food, and utilities.

That might be because not every owner considers all of the costs of ownership when acquiring a car. It's easy to get caught up in your monthly payment or even the out-the-door price of your vehicle, which includes things like taxes and fees.

"What isn't included in the out-the-door price is continuing ownership expenditures — like petrol, maintenance, and insurance," explains NerdWallet auto writer Shannon Bradley, "so when preparing to buy a car, it's vital to budget for those, too."

Buyer Advice

Budgeting for a vehicle before purchasing it is a simple method to prevent getting into a difficult scenario. Note that your monthly car expenditures will include more than simply your loan payment and insurance. You'll also need to budget for petrol, maintenance, and other expenses.

You may also search around for an auto loan before making a purchase, which might save you thousands of dollars. "Reducing a $30,000, 60-month automobile loan from a rate of 10% to 8% reduces total interest paid over the life of the loan by $1,700," Bradley explains.

Ultimately, buying second hand automobiles may be the simplest approach to save money in the long term. In our survey, 48% of customers expecting to buy a car in the next 12 months stated they would buy used, while 68% said they would buy new (the figures do not add up to 100% because respondents may answer for several intended purchases).

According to Kelley Blue Book, the average new automobile price in January 2023 was $49,388, with the average used car price being $26,510. That's a savings of more than $22,000, which might help reduce overall financial stress.

Finally, purchasing a car is similar to making most other significant expenditures. You may reduce stress by planning for all expenditures and searching around before making a purchase.