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If you feel like driving is more expensive than ever, you’re not alone. Car ownership costs — including auto insurance — have increased dramatically in recent years. According to Motley Fool Money research, the average cost of car ownership was $12,078 in 2023. Just 10 years earlier, in 2013, car ownership only cost $8,467.
That means the cost of owning a car has skyrocketed by 43% in the past 10 years.
Let’s look at what the rising costs of car ownership mean for your bank account — and see how you can find the best deals on auto insurance and auto loans in 2025.
Why cars are so expensive now
Car ownership is one area of American life that’s been hit hardest by rising inflation in recent years. Most Americans not only own cars, but also need them to get to work, school, shop, and more. As such, it’s no wonder that the high costs of car ownership can feel especially painful.
Here are the three biggest costs of car ownership, according to Bureau of Labor Statistics data:
- Vehicle purchases (net outlay): $5,539 (46% of overall cost)
- Gas, other fuels, and motor oil: $2,694 (22% of overall cost)
- Auto insurance: $1,775 (15% of overall cost)
For drivers who want to lower the costs of car ownership, one obvious answer is to buy a lower-priced car. But that’s not always an easy option. New cars keep getting more expensive with more advanced features, and lower-priced used cars are not always available. The price of gas is also outside our control as it can go up or down based on fluctuations in the global economy. And owning a hybrid or electric vehicle is not always cheaper.
But here’s one thing that drivers can do to reduce the cost of car ownership: Shop around for car insurance. Click here to see our curated list of the best car insurance companies — and learn how different companies could offer lower rates on auto insurance.
Good news: Cars might get more affordable soon
The U.S. auto market is always changing, as car companies try to make profits and customers decide when to buy new vehicles and when to walk away from the dealership. Just because the cost of car ownership has gone up by almost 50% in the past 10 years doesn’t mean that cars will stay unaffordable for everyone forever.
Recent data from Kelley Blue Book found that new cars got more affordable in October 2024. It looks at both prices and the time it will take to pay off an average car.
The average new car sold for $48,623 in October — that’s a lot of money, but Americans’ average wages have gone up, too. Kelley Blue Book says that the average American would need to work 37.4 weeks to pay off the average new car sale price. That’s better affordability than America has seen since August 2021.
The U.S. auto market might be getting a little more customer-friendly, especially for drivers with a good credit score. That’s because auto loan rates might be coming down, too.
Fed rate cuts = cheaper auto loan rates
This September and November, the Federal Reserve announced rate cuts totaling 0.75%. These rate cuts will cause the interest rates on auto loans to go down. It might not happen immediately for every car buyer. But for people with good credit who are buying a newer vehicle, auto loan APRs might start to fall by the end of 2024 and into 2025.
Some of the best auto loans right now are offering 6% APR (or lower) for qualified borrowers. Anyone who wants to reduce their car ownership costs might want to start by improving their credit score. Better credit can help save hundreds of dollars per year, or thousands of dollars total, on the cost of a car loan.
Bottom line
Owning a car has gotten shockingly expensive for many Americans. But even though the sale price of new cars, the cost of gasoline, and some aspects of auto insurance rates are outside our control, drivers still have choices.
To cut car ownership costs, start by shopping around for better prices on car insurance. And to save money on auto loan interest for future car purchases, try to boost your credit score before you’re in the market for a new (or used) vehicle.
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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.