Drivers Grapple With 9% Increase in Car Ownership Costs in 2023

In the past year, Americans have faced a 3.7% jump in food costs, a 7.4% increase in rent, and a 7.2% spike in the price of personal care products, according to the U.S. Consumer Price Index (CPI) issued by the Bureau of Labor Statistics (BLS). On top of those inflated expenses, car ownership costs have increased 9% since the start of 2023.

Rising costs are influencing driver behavior. One-tenth of car owners are considering selling a vehicle, and nearly a quarter put off new car purchases in 2023 to cut costs, an Insurify survey reveals.

Insurify’s data science team broke down the most significant costs of car ownership, from vehicle maintenance and repair to auto insurance premiums, to figure out how much it costs to own a car in 2023.

Key trends

• The cost of car ownership is up 9% in 2023, driven by rising insurance rates, high vehicle transaction prices, and maintenance and repair inflation.

• Auto insurance is the biggest expense of owning a car, with the average driver paying $2,076 a year for full coverage.

• Average auto loan interest rates have increased to a new peak of 10.48% in 2023, according to Cox Automotive data.

• The price of new cars is hovering near $48,000. As a result, drivers are keeping vehicles longer, and used car buyers face a limited inventory.

How much it costs to own a car in 2023

Average costs associated with owning a car, including insurance, fuel, and vehicle maintenance and repair, reached $4,695 per year in 2023, up from $4,322 in 2022. However, ownership costs vary by state, driver history, vehicle type, and other factors.

The highest car ownership costs

Owning a car involves multiple costs, including fuel, state registration fees, and auto insurance. Significant expenses include:

• Insurance: U.S. drivers pay an overall average of $1,674 per year for auto insurance, up from $1,428 in 2022. Full coverage costs an average of $2,076 per month.

• Fuel: Annual fuel costs for gas and diesel cars average $2,337, while electric vehicles cost an average of $783 per year to power. (U.S. Department of Energy)

• Maintenance and repair: The price of car parts rose considerably between 2022 and 2023 and continues to grow. The consumer price index for motor vehicle maintenance and repair has increased 10% since September 2022. Drivers are now paying an average of $1,320 per year on vehicle maintenance and repairs, up from $1,120 two years ago.

• Financing: Drivers with a five-year loan, 10% down, and the national average interest rate pay $1,253 annually to finance a car, up from $658 in 2022. (AAA)

• License, registration, and taxes: Fees vary by state, but drivers spend an average of $762 annually, up from $675 last year. (AAA)

• Depreciation: New vehicles depreciate by $4,538 annually, up from $3,656 in 2022. (AAA)

Car insurance rates are up 17%, and drivers are unsure how to reduce costs

Car insurance rates have been steadily rising, with overall rates up 17% and the cost of full coverage up 21% since the start of the year.

Just over 41% of the American drivers Insurify surveyed reported they saw their premium increase at least once in the last 12 months. A further 22% said their premiums had increased more than once.

Drivers are responding to price increases by lowering certain coverage limits, removing other types of coverage entirely, and increasing their deductibles. Another common way to save is switching insurance companies, with 10% of drivers reporting doing so to cut costs.

Slightly raising your deductible and shopping around for a new insurer with a cheaper deal are efficient ways to lower the price tag on your car insurance. However, lowering coverage limits and doing away with certain coverages are riskier options that might leave drivers vulnerable to high out-of-pocket costs.

“If you drop full coverage, you’re opening yourself up to paying out of pocket for damages to your car and property in the event of an accident,” says Shawn Powers, VP of insurance sales at Insurify. “You might be saving on your monthly premium, but if you get into an accident, you might have to shell out more than you saved, especially with increases in the price of auto parts.”

“You have to balance the worth of your car, your ability to replace it, and the risk of your vehicle being severely damaged in an accident or stolen.”

Drivers who finance and lease their cars are also typically required to carry full coverage. Dropping to a liability-only policy could violate loan terms.

A staggering 45% of drivers surveyed didn’t take any steps to reduce their premium at all. However, with insurance prices expected to continue trending upward well into next year, drivers should stay on top of their policies and shop around to ensure they’re getting a good deal.

Drivers are paying more for vehicle maintenance and repairs

The price of motor vehicle maintenance and repair has increased more than 10% year over year, according to the Bureau of Labor Statistics Consumer Price Index. Drivers now spend an average of $1,320 annually on maintenance and repairs.

Inflated costs are taking some drivers by surprise. In a survey of 1,900 drivers conducted by Insurify, 38% of respondents who had their cars repaired this year said they paid more than they expected.

The increasing complexity of new vehicles is partially to blame. Newer cars have technologically backed safety features, like driver assistance, automatic emergency braking, and lane-keeping systems. These features require sensors in vulnerable areas, and even a minor bumper ding could require replacing the entire part — which can get expensive.

Despite rising costs, regular vehicle maintenance could help you save money over time. Using the manufacturer’s recommended grade of motor oil reduces gas costs by up to 8 cents per gallon, and keeping your tires inflated cuts an additional 2 cents, DOE data shows. Promptly addressing any issues also saves you from more expensive repairs in the future.

The cost of fuel in 2023 and beyond

Diesel- and gas-powered cars cost an average of $2,337 per year to fuel, according to a DOE analysis of 2023 model-year vehicles. In comparison, EVs cost an average of $783 annually.

The DOE’s analysis assumed 15,000 miles of travel each year with fuel costs of $3.58 per gallon for regular unleaded gasoline, $4.52 per gallon for premium, $4.44 per gallon for diesel, and 14 cents per kWh for electricity.

Gas prices climbed to an average of $3.96 per gallon in September, making it the most expensive month to date in 2023. Prices are still 21% lower than the record high of $5.03 per gallon in June 2022, according to U.S. Energy Information Administration (EIA) data.

However, fuel prices vary widely by state. A gallon of gas costs an average of $5.41 in California, compared to $3.35 in Texas.^[1] West Coast drivers saw the greatest increase in gas prices over the past six months, at nearly 11%, but costs fell 2.4% in the Midwest. Electricity costs are also higher in some regions, with New Englanders paying the most, at 27 cents per kWh.^[2]

The EIA forecasts gas prices will hold steady heading into the holiday season. It also forecasts an average $3.61 per gallon in 2024, with a global oil production increase of 1 million barrels in 2024. This means gas prices are projected to be only slightly higher next year. However, international conflicts and supply conditions may raise crude oil prices from an average of $90 per barrel (b) to $93/b in 2024.

Average new vehicle prices creep toward $50K

More than a third of Insurify survey respondents who considered buying a car in 2023 didn’t make a purchase because prices were too high. New vehicle prices averaged $47,899 in September 2023, according to Cox Automotive. The average price of a new car is now about 64% of the median annual household income.^[3]

Used vehicles cost an average of $26,717 — 44% less than a new car — but finding the right one could be tricky for drivers on a budget. Used cars priced less than $10,000 have the smallest inventory, at 32 days’ supply. But used vehicles priced $35,000 and more have 58 days’ supply, meaning dealerships have enough in stock for nearly two months, according to Cox Automotive.

The average age of used cars and light trucks rose to a new record of 12.5 years in 2023, up by more than three months over 2022, according to S&P Global Mobility. The increase marks the largest annual jump in age since the 2008–2009 recession.

Drivers are likely holding on to their cars for longer in light of tight inventory and rising interest rates for new vehicle loans, which increased to a peak of 10.48% in 2023.^[4] However, some dealers offer financing with significantly lower interest rates to entice car buyers.

Insurify Insights

Jessica Edmondson

Director of Media Outreach, Insurify

“This year, I needed a new three-row SUV to accommodate my family. I was looking at the Mazda CX-90. Current interest rates would have kept me from purchasing. I would never have exchanged my Subaru Crosstrek’s 1.9% financing rate for one above 8%. Mazda Financing offered 0.9% and 1.9% interest rates to incentivize buyers to try the new model. I wouldn’t have bought the Mazda CX-90 without this deal.”

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The supply of unsold new vehicles climbed to 2.21 million in 2023, but inventory remains 35% lower than pre-pandemic levels.

How to save on car ownership costs

Car ownership can be a major financial burden, but if you need a car to get to work or drop your kids off at school, giving up your vehicle isn’t an option. These tips can help you reduce some of the highest car ownership costs.

Choose a fuel-efficient vehicle

Gas prices are down 21% from the June 2022 peak of $5.03 per gallon, but fuel is still one of the most expensive costs of car ownership. Choosing a fuel-efficient vehicle can significantly reduce your costs over time.

Purchasing an EV might also reduce your costs. Insurify’s analysis of gas-powered models and their electric counterparts shows drivers can save between $1,363 and $2,471 on fuel by switching to an EV.

Build up your credit score

If you plan on taking out an auto loan soon, improving your credit score could help you save on interest. Auto loan applicants with a credit score of 580–619 pay an average interest rate of 11.53% for new vehicles and 18.55% for used cars, according to Experian. Applicants with a score of 660–719 pay 6.4% for new cars and 8.75% for used vehicles.

Insurance companies in most states can also factor in your credit to determine your rate. While insurers don’t use your exact credit score, they often look at your credit history to help calculate your risk level. Drivers with excellent credit scores pay an average of $131 per month for car insurance, but drivers with poor credit pay $191.

Switch to a cheaper car insurance policy

Car insurance is one of the most significant costs of car ownership, especially in 2023, with rates spiking 17% nationwide. Comparison shopping for a better car insurance rate could help you save on coverage.

If you’d rather stick with your current insurer, consider bundling your homeowners and auto policies for a discount. Many companies offer additional car insurance discounts, including for defensive driving courses, telematics participation, anti-theft features, and military affiliation.

Methodology

To determine the yearly cost of car ownership for the average American, Insurify considered the combined cost of car insurance, gas, and maintenance and repairs in 2022 and 2023. 

Car insurance rates come from Insurify’s proprietary database of real-time car insurance quotes from partner carriers, and the prices used in this study reflect the average annual cost of insurance of a full-coverage car insurance policy (up to $50,000 bodily injury coverage per person and $100,000 per accident; a $50,000 property damage limit; and $1,000 deductible for both comprehensive and collision coverage) for a driver between the age of 20 and 70 with a clean driving record and average or better credit.

Gas prices come from AAA’s Gas Prices report and represent prices between Oct. 15, 2023, and Oct. 15, 2022. In order to calculate yearly gas expenses for the average driver, Insurify data scientists calculated the cost of driving 12,000 miles per year in a 2018 Honda Accord, the most popular vehicle in Insurify’s database.

Yearly vehicle maintenance and repairs costs in 2022 come from AAA’s Your Driving Costs Fact Sheet 2022. Insurify data scientists estimated 2023 expenses by analyzing federal CPI data on the year-over-year increase in motor vehicle maintenance and repair costs.

This report also uses insights from an Insurify survey conducted in September 2023, which sourced responses from 1,900 drivers across America.