The costs of car ownership are straining finances
For millions of Americans, cars are a necessity — to get to work, to carry children around, to buy food. In recent memory, they've also never been as expensive to own.
According to AAA, the average annual cost in the first five years of new-car ownership rose to $12,182 this year, from $10,728 last year, reflecting increased purchase prices, maintenance costs and finance charges. That's 16% of the median household income, before taxes. (The figure includes depreciation.)
What does that look like in the aggregate? About 92% of households have at least one car available to them, and 22% have at least three. That comes out to about 223 million personal vehicles and trillions of dollars a year in spending. By contrast, only $79 billion was spent on public transportation in 2019 for both capital and operating expenses.
On a personal level, America's dependence on automobiles means hefty bills, the risk of dangerous crashes and stress. And now, even with strong wage growth and elevated savings in recent years, high sticker prices and escalating interest rates are starting to take a toll: The share of borrowers moving into delinquency jumped in late 2022 and early 2023. Personal vehicles often become workers' largest expense, on a par with housing, child care and food.
To understand how car owners are coping, we asked five of them to lay out the expenses associated with their cars. They're a lot higher than people sometimes bargain for. For most, there is no alternative.
2-car family
Brent McCulley is a 33-year-old real estate agent in Pompano Beach, Florida, whose family of four requires two cars, making the cost of transportation its largest expense.
McCulley had been getting along all right in Newark, New Jersey, with one Kia Soul among him, his wife and their young daughter. It was stressful, shuttling the toddler to day care and then getting to his office by 8 a.m., but they made it work with enough public transportation to handle inbetween trips.
Florida was a different story. McCulley was born there and always wanted to return, so they moved to Pompano Beach in early 2022. By that time, after some car swaps, they were driving a 2022 Kia Forte, which he leased for $294 per month. They had a baby boy and fewer transit options, so they needed to go car shopping again.
“She could walk to Aldi and get groceries,” McCulley said of his wife. “But beyond that, there's only so much you can do.”
McCulley's credit score had taken a hit after he took on debt to finance the move. So he bought a 2019 Kia Sorento from Carvana at a 12% interest rate, which would have required paying $7,645 in interest over the course of the loan. A few months later, his credit had improved enough for him to refinance at a 6.6% rate, which left the monthly payments at $577.
That's only a little more than the average monthly payment for used cars, which reached $533 in the second quarter this year, according to TransUnion. The average payment for new cars is $741. Both are record highs.
Insurance on both of those cars in Florida comes to $459. Gas adds $200 or so, bringing the total to around $1,530 a month. That's about as much as their rent.
And there's maintenance. After spending five years with a 1992 Buick Century that would break down every other week, McCulley likes to pay more for new or late-model vehicles because they tend to have fewer issues. Still, the Sorento has required about $3,000 in maintenance over the past year — the front brakes had to be replaced, then the back brakes and then a flat tire.
McCulley expects this to be a lucrative year at work, with commissions that should amount to about double Pompano Beach's median household income. But with all their expenses — including the resumption of mandatory student loan payments and his son's day care — they're budgeting carefully. His wife decided to take a job at a veterinarian's office to cover all the bills.
For McCulley, it's an illustration that even for people who look comfortably middle class, car expenses contribute to a feeling of being overwhelmed.
“Whether you're a millionaire trying to figure out how to allocate your taxes or whether you're making minimum wage,” McCulley said, “it's all struggle in different kinds of ways.”
Used car troubles
Troy Massey is a 29-yearold Amazon driver in Jacksonville, Florida, who needs a car to go even a few miles but keeps getting underwater on car loans.
A few years ago, debts had piled up while Massey was attending the University of Central Florida; he lost his financial aid and had to drop out. Juggling too many bills, he fell behind on the loan for his 2013 Honda Civic. In the fall of 2021, it was repossessed — but because he still owed $4,800, the loan balance, he had to keep making payments on a car he didn't own.
Massey spent most of 2022 without a vehicle. It was technically feasible; he lived only a few miles from where he worked, at Walmart. But the bus wasn't reliable, and when he tried to walk or bike, he'd end up soaked in sweat or a sudden downpour. After a while, he'd had enough.
“I just ended up biting the bullet and saying, `I need to get another car,' ” Massey said. “I know what happened to the last one, but it's a necessity. If we had some kind of rail system or something like that, it'd be fine. But we don't.”
This time, though, getting a car was even more expensive. The cheapest reliable car he could find, a Toyota Corolla with 89,000 miles, cost $18,240 including taxes and fees. With a 15.2% interest rate and an extended warranty, that left him with monthly payments of $451. Looking for insurance, he couldn't find anything less than $323 a month for the most basic plan.
Soon after, he switched from Walmart to a WinnDixie and took a second job working part time at Amazon, a 35-minute drive from his apartment. Gas for those commutes cost about $40 per week, bringing the monthly total to nearly $1,000, along with occasional maintenance, like the $100 for his last oil change and $27 to fix a slowly leaking tire.
“For someone who's making a decent income, that might not be as hard,” Massey said. “But for someone like me who's in the middle of trying to change careers making $15.50 an hour, it hits you like a truck.”
Massey thought about selling his Corolla and trying to find something even cheaper. The problem is, he still owes about $16,000 on the car, and its book value is only about half that, so he'd have to pay off the difference — again.
That's an increasingly common experience, as the average used-car loan at origination has reached 123% of the vehicle's market value, according to TransUnion. And although overall delinquency on auto loans is low, delinquencies have been climbing quickly since interest rates started increasing in 2022.
In August, he switched to a job driving full time for one of Amazon's delivery contractors making $18.75 an hour, which comes to about $3,000 a month before taxes. Rent for his apartment with roommates is $700, leaving little for food and the credit card bills he's still trying to pay off.
Massey is building his software programming portfolio so he can start applying for jobs that pay more — at least enough to afford his car.
Long commuter
Jennifer Owings is a 48-year-old school administrator in New York City whose two- to three-hour round-trip commute costs more than $1,000 a month.
Owings loves her job, as an assistant principal at a public elementary school in Williamsburg, Brooklyn. She also loves her home on Staten Island, a condominium with a pool that she bought after a divorce a few years ago, and the community she has developed there.
She does not, however, love the commute — or how much it costs.
She gets in her 2017 Subaru Outback, which she's paying off in $328 installments, and leaves at 5:10 a.m., when the 13 miles over the Verrazzano-Narrows Bridge and down the Brooklyn-Queens Expressway are mostly clear (but include tolls totaling $175 a month). The afternoon commute is tricky; if she waits too long, it can take two hours. “Any Friday in June, forget about it,” Owings said.
Some expenses are occasional, like maintenance, which Owings estimates at $50 a month on average. So far insurance has covered major damage, like the crash in 2021 that put the car in the shop for weeks, but it costs $232 a month. Even minor needs add up, like registration this year, which was $138. She's also enrolled in a monthly unlimited car-wash plan, which costs $23.95.
Parking is the only thing that's free, and some older staff members at her school even drive from Long Island. “I'd say the under-30 crew probably doesn't have their own cars because they can't afford to — it's too expensive,” Owings said.
She could take a pay cut and return to teaching in a school closer to her house on Staten Island, and save some of the $200 a month she spends on gas. But a good boss, leadership opportunities and a school she likes are hard to give up. And public transportation?
“It would actually be faster to take my own kayak — or to run,” said Owings, who competes in marathons. Instead, as much as she enjoys having the time to catch up with friends, spending continuous hours in a car every day has given her hip pain. “Other people have old sports injuries,” she said. “I have a commuting injury.”
Ride-share driver
Aydee Joya is a 56-yearold Uber driver living in Arlington, Virginia, who barely breaks even after accounting for all her expenses.
Technically, Joya's car is her job, but sometimes it feels as if she's working just to pay for it.
Joya immigrated from El Salvador as a child and worked for 26 years as a bilingual family assistant in public schools. When her job was eliminated in 2018, a friend told her that driving for taxi apps was a good way to make money on her own schedule, so she started driving for Uber in her 2014 Nissan Rogue.
It worked out all right for a while, and she enjoyed driving. But Joya quickly learned how many costs are involved in ferrying people around, along with the $235 she spends in gas per week.
First came a spent battery, followed by oil changes, tires punctured by potholes, seats soiled by passengers' vomit. In July and August, routine maintenance, including a tire alignment and transmission flush, came to $1,433.
“There are things that people don't know that are involved with their car,” Joya said. “We use the brakes all the time. You need to do a lot of repairs, not only tires, not only oil change. All the things inside the car get damaged.”
As many ride-hailing drivers do for their protection, she installed a camera in the car at her expense. County property taxes on her vehicle come to $566 per year, tolls add about $32 a month, and she faces occasional speeding tickets.
Insurance costs $603 for six months. In 2022, despite often driving 12 hours a day, she said she made only $12,000 after expenses.
In early 2023, as she drove to pick up a passenger, her car was rear-ended. The Nissan was totaled, and Joya was left with slicing back pain that has made it difficult to drive for long stretches.
Now she drives a 2020 Honda HR-V with a monthly loan payment of $536. To make matters worse, she said, Uber isn't paying as much on her fares as it used to. (Uber said drivers' average earnings per hour that they were engaged with a passenger — that is, not counting time between fares — had risen since 2019.)
“I'm spending my own money for Uber,” while the company makes the profit, Joya said.
Joya has thought about moving on from Uber, and at the urging of her husband — a retired construction worker who worries about her being out late, with several high-profile reports of violence toward ride-hailing drivers recently — earned a certificate to become a clinical medical assistant. But she hasn't found a job yet, so she keeps driving.
Collision costs
Cyndy Knighton is a 58-year-old transportation engineer for the city of Tukwila, Washington, who suffered several car accidents over the past year and a half.
Transportation didn't cost that much for Knighton, who drove a paid-off 2009 Nissan Altima hybrid — until April 2022, when a teenager driving on a learner's permit made a left turn in front of her. She broke a wrist and her sternum in the collision, and the car was totaled.
An insurance payout covered the cost of a 14-yearold Subaru and immediately needed repairs, but the vehicle switch subjected her to spiking gasoline prices that she had mostly avoided with her hybrid; the new car required about $163 per month to fuel.
In search of a longer-term solution, Knighton decided to order a new hybrid Toyota Highlander that could handle her steep driveway even during the rare snow and transport her four Samoyeds, which she breeds and occasionally enters in dog shows.
That car, however, got snarled in pandemic supplychain issues. The 2022 edition was converted into a 2023, with a slightly higher base price. Then in March, Knighton was hit again — her Subaru was rear-ended on Interstate 5 heading into Seattle, resulting in a concussion and another wrecked vehicle.
This time, with used cars in short supply, she paid about $8,200 — more than the $6,200 insurance payout — to buy a 2001 Highlander with poor gas mileage. To add more insurance protection, she's now paying $158 a month in premiums.
Treatment for her injuries has racked up more than $86,000 in medical bills, which her employer's health insurance has covered, other than her $750 in copayments. In September, after more than a year of wrangling with her car insurance company, she finally heard she would receive insurance payouts worth $80,000 after lawyers' fees.
That will be enough to buy the new Highlander outright, at $62,350 including taxes. But Knighton would never have chosen to finance a new car that way. Aside from the pain and continuing physical therapy, the psychic trauma of repeated accidents takes its own toll. Small shocks on the road — like when she had to slam on the brakes recently, sending one of her dogs into the windshield — can bring on tears.
“I get the irony, that I'm a transportation professional and I'm afraid to drive,” Knighton said. “To have that lurking there, that could break through at any random time for any reason, is debilitating. It's an emotional, intellectual cost that is intangible.”