Your Car Is a Depreciating Asset: What It Really Costs to Own
A car payment is the cost people quote, because it is the one that arrives every month with a number on it. The larger cost never sends a bill: the car is worth less each year than it was the year before. Both belong in the same total.
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Ask someone what their car costs and you will usually get the monthly payment. It is a real number and it arrives on a schedule, which is exactly why it comes to mind first. It is also, for most owners, less than half the story.
A car costs money in six different ways, and only two of them show up as a recurring charge you would notice. The largest one has no due date at all.
What a year of car ownership costs
AAA has published its Your Driving Costs study since 1950. The 2026 edition prices five top-selling models in each of seven vehicle categories over five years and 75,000 miles, and lands on an average of $12,863 a year, or $1,071.92 a month. The sales-weighted average sticker price of the cars in the study was $39,376.[1]
That is close to what households actually report spending. In the Bureau of Labor Statistics Consumer Expenditure Survey for 2024, transportation came to $13,318 per household, or 17.0% of average annual spending of $78,535. Only housing takes more, at 33.4%. Vehicle purchases alone accounted for $5,337 and gasoline for $2,411.[2]
Two caveats before the breakdown. AAA prices new vehicles bought with a loan, so an owner driving a paid-off ten-year-old sedan is nowhere near this figure. And AAA changed its methodology this year, so the 2026 total is not directly comparable with the 2025 one.[1]
The six costs inside that number
Split the average year into its parts and the ranking is not the one most people would guess.
| Cost | AAA 2026 average | What it covers |
|---|---|---|
| Depreciation | $4,422 a year | Purchase price minus estimated trade-in value at five years and 75,000 miles |
| Fuel | 17.3¢ a mile ($2,595 at 15,000 miles) | Regular gas averaged $4.152 a gallon over the study period |
| Insurance | $2,098 a year | Full coverage, personal use, experienced driver under 65, city or suburb |
| Maintenance, repair, tires | 11.7¢ a mile ($1,755 at 15,000 miles) | Scheduled service, wear-and-tear repairs, an extended warranty, one set of tires |
| Finance charges | $1,184 a year | Five-year loan, 15% down, at the national average interest rate |
| License, registration, taxes | $802 a year | Taxes and fees at purchase, plus annual registration |
AAA Your Driving Costs 2026, averaged over five years and 75,000 miles. Per-mile figures converted at the study's 15,000 miles a year; the parts add to roughly the published total, with rounding.
Of the six, exactly two arrive as something you would recognize as a bill every month: fuel and, if you financed, the loan payment that carries the finance charge. Insurance usually arrives every six months. Registration comes once a year. Maintenance arrives in irregular lumps, which is why a set of tires feels like an emergency rather than a predictable cost, and why it belongs in a fund you pay into monthly instead.
The costs also move in different directions, sometimes sharply. In the year to August 2026, the Consumer Price Index had gasoline up 27.4% and motor vehicle maintenance and repair up 5.2%, while motor vehicle insurance fell 5.1% and used car prices fell 2.3%, against 3.4% for all items.[3] A budget line copied from last year is a guess, not a number.
Depreciation: the bill that never arrives
Depreciation is the difference between what you paid for the car and what it is worth when you are done with it. AAA puts it at $4,422 a year on average, more than insurance and financing combined.[1] Over the study’s five years that is roughly $22,000 of value gone from a car whose average sticker price was $39,376.
You never write that check. It shows up only twice: once when you sell or trade in for less than you hoped, and continuously, if you are tracking it, as the falling value of an asset you own. That is the practical argument for putting a car on your balance sheet at a market value you actually refresh, rather than at what you paid or not at all. Our guide to calculating net worth accurately treats a car the same way it treats a house: current value on one side, the loan against it on the other.
Depreciation is also the one cost you decide most of in a single afternoon. It scales with the purchase price and with how long you keep the car. Buying used moves part of the curve to the previous owner, and keeping a car past the loan gives you years where the only costs are fuel, insurance, registration, and repairs.
Cost per mile, and why mileage changes it
Four of the six costs barely notice how much you drive. Depreciation is mostly a function of age and model, and insurance, financing, and registration are fixed. So the cost of a mile depends heavily on how many miles you spread those fixed costs across.
A useful outside check: the IRS business standard mileage rate, which exists to approximate the cost of operating a vehicle, is 76 cents a mile from July 1 through December 31, 2026, up from 72.5 cents in the first half of the year after a rare mid-year adjustment.[7] Two organizations working independently land within a few cents of each other at typical mileage.
What you drive matters as much as how much:
| Vehicle category | Cost per mile | Note |
|---|---|---|
| Small sedan | 61.73¢ | Least expensive category overall |
| Medium sedan | 70.37¢ | Second lowest |
| Subcompact SUV | 71.68¢ | Third lowest |
| Compact SUV | 77.80¢ | Second-lowest fuel costs of any category |
| Midsize pickup | 87.26¢ | Second-highest fuel costs |
| Medium SUV | 96.32¢ | Second-most expensive to own and operate |
| Half-ton pickup | $1.10 | Highest overall driving costs |
AAA Your Driving Costs 2026. A half-ton pickup costs about 78% more per mile than a small sedan.
What financing adds
Most new cars are financed: 83.32% of new vehicle buyers took a loan in the second quarter of 2026, at an average payment of $765 a month on an average loan of $43,610. Used buyers averaged $542 a month on $27,852.[4] Across the country, auto loan balances reached $1.71 trillion in the same quarter, up $28 billion.[6]
The term is where the cost hides. The average new loan now runs 69.46 months, and in the first quarter of 2026 35.55% of new vehicle loans carried terms longer than 72 months, up from 30.83% a year earlier. Another 3.33% ran past 85 months.[5] A longer term lowers the payment and raises the interest, and it keeps the balance above the car’s falling value for longer. The financing decisions behind that total, including a trade-in balance rolled into the next loan, are worth their own read: what you actually repay on a car loan.
Rate matters more than term for the total. Experian’s second-quarter 2026 averages ranged from 4.41% for super-prime borrowers on a new car to 13.52% for subprime and 16.11% for deep subprime.[4] On a $43,610 loan, that spread is thousands of dollars of interest for the same car. Auto loans are also under visible strain: 3.00% of balances moved into serious delinquency in the second quarter of 2026.[6] If a car loan is one of several debts you are paying down, the order you attack them in is worth a decision rather than a default, which is what the avalanche and snowball methods are really arguing about.
Work out your own number
National averages are a sanity check, not your budget. Your insurance, your commute, your state’s registration fees, and the car you actually own decide the total. Twelve months of your own records will get you there in about half an hour.
- 1Pull twelve months of vehicle spendingFuel or charging, insurance premiums, registration, repairs, scheduled service, tires, parking, tolls, car washes. Use a full year so the annual and semiannual charges are captured, not a typical month.
- 2Add the interest, not the paymentA loan payment is part interest (a cost) and part principal (a transfer that reduces what you owe). For a cost total, count the interest. Your lender's year-end statement or amortization schedule has the split.
- 3Estimate this year's depreciationLook up a current private-party or trade-in value, and compare it with the value a year ago. The difference is what the car cost you in value, whether or not you noticed.
- 4Divide by your actual milesOdometer at the start of the year, odometer now. Total cost divided by miles driven gives you a cost per mile you can compare with AAA's 86 cents and with the trip you are deciding whether to take.
- 5Re-check once a yearInsurance renewals, a new registration bracket, and a repair year after the warranty ends all move the number. An annual pass keeps the estimate honest.
Keeping it visible month to month
The reason most people quote the payment is that the payment is the only piece anything tracks for them. The rest is scattered across a gas card, an insurance autopay, a tire shop receipt, and a value nobody is watching at all.
In LumaLedger, the Income & spending page groups a year of transactions by category, so fuel, insurance, registration, and repairs add up on their own without you keeping a spreadsheet. Recurring catches the insurance premium and any subscriptions attached to the car, and Reports puts a full year on one page.
The value side lives on the Vehicles page, which keeps each car with its make, model, and year, the estimated value you set, and the auto loan linked to it. It shows the equity between them and charts that equity over time, and it marks a value as stale once it is more than six months old, because a car ages faster than a house. When a car leaves, excluding it takes its loan out of your totals too, so the debt does not outlive the vehicle.
Put the two together and the full cost stops being a mystery: the cash you spent on the car this year, plus the value it lost, against the miles you got for it.
None of this argues for or against owning a car. It argues for knowing the number. A household that can say what a mile costs can decide about a commute, a second vehicle, or a trade-in with something better than the monthly payment to go on.
LumaLedger links your banks and cards, finds every recurring charge, and keeps a true double-entry ledger of your net worth. It’s free during the private beta.
Open your ledgerFrequently asked questions
How much does it cost to own a car per year?
AAA's 2026 Your Driving Costs study puts the average for a new vehicle at $12,863 a year, or $1,071.92 a month, measured over five years and 75,000 miles. That total includes depreciation, financing, fuel, insurance, maintenance, and license and registration. Small sedans are the cheapest category at about 62 cents a mile and half-ton pickups the most expensive at $1.10.
How fast does a new car depreciate?
AAA estimates the average new vehicle loses $4,422 of value a year, based on the difference between the purchase price and the estimated trade-in value after five years and 75,000 miles. It is the largest single cost of ownership, ahead of fuel and insurance, and the only one that never appears as a payment.
What does it cost per mile to drive?
AAA's 2026 averages are $1.10 a mile at 10,000 miles a year, 86 cents at 15,000, and 74 cents at 20,000. The rate falls as mileage rises because depreciation, insurance, financing, and registration are largely fixed, so they spread across more miles. The IRS business standard mileage rate, a separate figure used for tax deductions, is 76 cents a mile from July 1 through December 31, 2026.
Should a car count as an asset in your net worth?
Yes, at what it would realistically sell for today, paired with the loan against it. A car you could sell for $22,000 with a $15,000 loan adds $7,000, not $22,000. Because the value falls faster than the loan balance early on, many owners owe more than the car is worth for a stretch of the loan.
Sources
- 1.AAA, Your Driving Costs 2026: How Much Does it Really Cost to Own a New Car? (September 2026).
- 2.U.S. Bureau of Labor Statistics, Consumer Expenditures, 2024 (December 2025).
- 3.U.S. Bureau of Labor Statistics, Consumer Price Index, August 2026 (September 2026).
- 4.Experian, Average Car Payment in 2026 (September 2026).
- 5.Experian, New Experian Automotive report shows nearly one-third of automotive loan terms are longer than six years (May 2026).
- 6.Federal Reserve Bank of New York, Household Debt and Credit Report, Q2 2026 (August 2026).
- 7.Internal Revenue Service, Standard mileage rates (accessed September 2026).
This article is for general education and isn't financial, tax, or legal advice. Figures come from the sources cited above as of their publication dates; examples use illustrative numbers.
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