What’s the true cost of owning a car?

If you’re getting ready to buy a car, you’ve probably looked at the sticker prices and practiced your negotiation skills to get to a good final selling price. And, you may have researched car loan options to estimate your down payment and the monthly payment amount. 

But those numbers tell only part of the story of the cost of owning a car. You’ll also need to pay for fuel, insurance, maintenance, registration and more. When you have a clear picture of ongoing car ownership expenses, you can feel more confident in your decision of which vehicle to buy.

Here’s what we’ll cover in this article:

• The average cost of owning a vehicle
• The most common car expenses
• Factors that affect the cost of owning a car
• The Navy Federal Credit Union “Cost of Car Ownership (COCO) Index”
• Smart tips to reduce car ownership costs
• Is owning a car worth it for you?

What’s the average cost of owning a vehicle?

The average cost of owning and operating a new vehicle is about $11,577 per year—or roughly $965 per month, according to AAA’s 2025 Your Driving Costs study. That figure reflects the average expenses across a range of vehicle types and driving situations. Your actual vehicle costs will depend on the make and model you choose, where you live, how much you drive and several other factors we’ll talk about below. 

Here’s how that average annual vehicle ownership cost breaks down by category:

* Fuel and maintenance figures are calculated per mile by AAA (13¢/mile and 11¢/mile respectively) and estimated here based on 15,000 miles driven annually.

Source: American Automobile Association (AAA) Your Driving Costs 2025. Figures reflect national averages for new vehicles over a 5-year, 75,000-mile ownership period. Actual costs will vary based on your vehicle, driving habits, location, and other factors.

Knowing what other people typically spend can give you a baseline as you budget for buying and maintaining your own car.

“A good way to estimate the real monthly cost of owning a vehicle is to add up fixed costs—like the loan/lease payment, insurance and taxes—and variable costs—like fuel, maintenance and repairs,” says Kevin Wince, VP of Consumer Lending Operations. “Converting annual expenses into monthly amounts can help to budget ahead of time. You can also use online auto cost or budgeting calculators to compare multiple loan scenarios, helping you see how different terms, rates and loan amounts impact your monthly payment and total vehicle cost.”

What are the most common car expenses?

The table above shows the big picture, but it helps to understand what each of those cost categories means and why they matter for your budget. Here’s how the real cost of vehicle ownership breaks down: 

• Depreciation. Depreciation is the difference between what you pay for a vehicle and what it’s worth when you sell or trade it in. It’s the highest cost of owning a car, and it starts the moment you drive off the dealership lot.
• Finance charges. If you take out a car loan, finance charges are the interest you pay in addition to the principal. The interest rate you qualify for and the length of your loan term will directly affect how much money you’ll pay over time.
• Insurance. Auto insurance is required in nearly every state, and the cost varies widely based on your location, driving record, age and type of vehicle.
• Fuel costs. How much you spend on gas—or electricity, if you drive an electric vehicle—depends on how much you drive, your vehicle’s fuel efficiency and local gas prices.
• Maintenance, repair and tires. Routine maintenance like oil changes, tire rotations and brake inspections can help keep your vehicle running. Regular checkups can help you avoid bigger, costlier repairs over time.
• Registration, licensing and taxes. Most states require you to register your vehicle annually and pay associated fees and taxes. Registration and licensing fees vary based on where you live and the type of vehicle you own.

Depending on your situation, you also may need to factor in operating costs like parking fees or highway tolls. And, don’t forget that unexpected repairs—fixing a dented fender, replacing a dead battery or repairing a damaged tire—also are part of the cost of vehicle ownership.

What affects the cost of owning a car?

Your actual costs will depend on a mix of factors. Some are related to the vehicle itself, while others depend on your personal situation. Each of these variables affects your total cost of car ownership:

Type of vehicle

The kind of vehicle you choose has one of the biggest impacts on what you’ll spend. A small sedan is the least expensive option overall at about 56 cents per mile to own and operate. In comparison, a half-ton pickup can run nearly 99 cents per mile, according to AAA’s 2025 data. Here’s how total ownership costs compare per mile by vehicle type:

Do some research to choose a vehicle that will help protect your pocketbook over time. “Buy used or choose vehicles with strong reliability ratings to help avoid steep depreciation and surprise repairs,” Wince says.

Buying new or used 

“New cars typically offer greater reliability, lower maintenance costs early on and the benefit of warranty coverage,” Wince says. “Used cars generally come with a lower purchase price and can offer better value by avoiding the steep initial cost of buying new.” Used vehicles tend to depreciate more slowly, although they also can come with higher maintenance costs.

Leasing vs. buying

The decision whether to lease or buy a vehicle usually comes down to whether you want lower monthly payments and short-term flexibility vs. higher upfront costs but lower total cost over time, Wince says.

“With a lease, you won’t own the vehicle at the end of the term or build equity. Paying off a loan means you own the car and have positive equity,” he says. “Budget-conscious buyers should weigh predictable, warranty-covered expenses with a lease against the long-term savings and ownership benefits of buying. You can also use online calculators to compare total costs of leasing vs. purchasing a vehicle.”

Gas, electric or hybrid

Electric vehicles (EVs) tend to have lower fuel and maintenance costs. Still, you also may face higher insurance, home-charging setup expenses and fewer repair options. Gas vehicles offer the convenience of widespread fueling and service access. Still, they can cost more to maintain over time, Wince says. 

Hybrids offer better fuel efficiency while avoiding the need for regular charging or concerns about how far you can drive between fill‑ups that come with driving an EV.

Where you live

Insurance rates, fuel prices, registration fees and even road conditions vary from state to state and city to city. Urban drivers may also deal with regular parking costs or tolls that add to their monthly expenses.

How much you drive

The more miles you put on a vehicle, the more you’ll spend on fuel and maintenance over time. Mileage also affects your vehicle’s condition, which plays a role in how quickly it depreciates.

“More fuel-efficient vehicles may cost more upfront but can save significantly on gas over time, especially for higher-mileage drivers,” Wince says.

Your driving record

A clean driving record generally means lower insurance premiums. Accidents, tickets or other incidents on your record can raise your rates considerably.

The Cost of Car Ownership (COCO) Index

“The biggest cost people often miss is the total cost of ownership beyond the monthly payment, especially ongoing expenses like gas, insurance and maintenance,” Wince says. 

Navy Federal’s Cost of Car Ownership (COCO) Index tracks changes in vehicle ownership costs across 11 common expense categories. “These costs are significant and rising, which adds pressure to household budgets over time,” he says. “It matters because a car that seems affordable based on its monthly payment can become much more expensive when these additional costs are factored in.”

Vehicle shoppers can use the COCO Index to see how costs are rising across different categories and be empowered to choose a vehicle that fits both their lifestyle and their financial goals, Wince says. “By using these insights alongside online budgeting calculators, buyers can better estimate total ownership costs and plan for long-term financial sustainability.”

4 tips to reduce car ownership costs

Owning a vehicle is a long-term financial commitment. Still, there are practical ways to keep your costs manageable over time. Start with these 4 simple tips:

1. Keep up with regular maintenance

Staying on top of oil changes, tire rotations and other scheduled services helps your vehicle run efficiently. It’s also one of the best ways to prevent small issues from turning into expensive repairs. Check your owner’s manual for your vehicle’s recommended maintenance schedule.

2. Drive efficiently to manage fuel costs

Aggressive driving habits like hard braking, rapid acceleration and excessive idling can lower your fuel efficiency and put more wear-and-tear on your vehicle. Driving closer to the speed limit and easing on and off the gas pedal are simple ways to lower fuel expenses.

3. Shop around for car insurance

Auto insurance rates can vary between providers. Compare quotes periodically and ask about discounts for safe driving, bundled policies or low annual mileage. Wince also recommends looking into adjusting your coverage or deductibles to fit your budget. Adding Guaranteed Asset Protection (GAP)^{Footnote [1]} can help if you have a loan or lease by covering any remaining balance on your loan after an insurance payout, which may reduce what you owe if your car is stolen or totaled, he says.

4. Consider refinancing your auto loan

If interest rates have dropped since you took out an auto loan, or if your credit has improved, refinancing may help you secure a lower rate and a lower monthly payment. Navy Federal offers auto loan refinancing^{Footnote [2]} that could help you save money over the life of your loan.

Is owning a car worth it for you?

For many people, owning a vehicle is a practical necessity. But if you live in an area with reliable public transportation, or you don’t need a car every day, it’s worth taking a step back to think about whether ownership is the right fit for your situation and your budget.

When you factor in all the expenses covered here, the true cost of owning a car could be almost $1,000 a month for a new vehicle. For some people, that’s a worthwhile investment in convenience, flexibility and independence. For others, taking advantage of ride-sharing, public transit or car-sharing services may cover their needs at a lower overall cost.

If you do need a vehicle, the decision doesn’t have to be all or nothing. Choosing a used car over a new one, or a smaller and more fuel-efficient model, can reduce what you spend each month—and over time. Run your numbers in our auto lease vs. buy calculator and new vs. used car calculator to compare payment estimates and explore your options before you decide.

Your next car purchase starts with a clear budget

Knowing what you’ll spend on a vehicle beyond the sticker price puts you in a strong position to choose wisely and plan. When you’re ready to take the next step, Navy Federal is here to help. From auto loans^{Footnote [2]} to our car buying service, powered by TrueCar®,^{Footnote [3]} we have the tools and resources to help you move forward with confidence.