The average true cost of car ownership per year, hidden costs included, is $12,863, according to AAA's 2026 Your Driving Costs study. That is $1,071.92 a month, 86 cents for every mile, for a car driven 15,000 miles a year. The average monthly car payment is around $767. Do the subtraction: the payment most buyers budget around is barely two-thirds of the real cost, and the rest never shows up on a bill.
The average true cost of car ownership per year, hidden costs included
AAA models five years of ownership across popular models, and its 2026 breakdown looks like this:
- Depreciation: $4,422 a year. The single largest cost, and the only one you never write a check for. It is the gap between what you paid and what the car is worth now.
- Insurance: $2,098 a year. Full coverage on a new vehicle, and rising.
- Finance charges: $1,184 a year. The interest hiding inside that monthly payment.
- Fuel: 17.3 cents a mile. AAA used a 12-month average of $4.152 a gallon through May 2026.
- Maintenance, repairs, and tires: 11.7 cents a mile.
- License, registration, and taxes: $802 a year.
Add it up: about $12,863. The 2025 study had the same headline at $11,577, so the number keeps climbing. For reference, the spread by vehicle type is enormous: a small sedan averages $9,259 a year while a half-ton pickup averages $16,449. Choosing the vehicle is choosing the cost.
The invisible cost: depreciation
Depreciation is the cost that breaks budgets precisely because it is invisible. You feel the payment leave your account every month. You do not feel the $4,422 evaporating from the car's value, which is more than insurance, finance charges, and registration combined. A new car typically sheds 15 to 20 percent of its value in the first year alone.
This is why a 2-to-4-year-old used car is the affordability sweet spot for most buyers: the first owner absorbed the worst of the depreciation, 30 to 40 percent of the car's value, and you buy in after the bleeding. The monthly payment on a used car is smaller, yes, but the depreciation bill you inherit is smaller too, and that second part matters more than most buyers realize.
The payment illusion
Dealerships sell the payment, not the car. Stretch a loan to 72 or 84 months and the monthly number shrinks beautifully while the total cost quietly grows: more interest, years spent owing more than the car is worth, and the same $4,000-plus of annual depreciation underneath it all. A $35,000 car financed at 6% over 60 months costs roughly $42,000 before you count a single drop of fuel.
Run the honest version instead: add payment, insurance, fuel, maintenance, and registration, and keep the total under 10% of your gross monthly income. That is the 10% rule from our 20/4/10 guide, and it exists because of numbers like $12,863. A household earning $120,000 a year gets a $12,000 annual transportation budget, which means the average new car is already over budget for the average buyer. That is not an opinion. That is AAA's arithmetic.
What to do with this number
Three practical moves:
- Budget the total, not the payment. Before you shop, write down insurance, fuel, and maintenance estimates for the specific car you are considering. Our calculator does this math for you.
- Price the depreciation. Check a 3-year resale value for any model you are considering. If the car loses $15,000 in three years, that is $5,000 a year of invisible cost, and it should be in your decision.
- Compare vehicle types honestly. The $7,000-a-year gap between a small sedan and a half-ton pickup is a vacation, a maxed IRA contribution, or a very comfortable emergency fund. Capability costs money; make sure you are actually using the capability.
My take
I think the single most useful number in car buying is not the sticker price, the APR, or the monthly payment. It is the per-year total, depreciation included, because it is the number your bank account actually experiences. Buyers who shop by payment end up with cars they cannot afford. Buyers who shop by total cost end up with cars they keep for a decade and never think about. Be the second kind.
Frequently asked questions
What is the average true cost of owning a car per year?
According to AAA's 2026 Your Driving Costs study, the average new vehicle costs $12,863 a year to own and operate, or $1,071.92 a month, based on 15,000 miles a year. That includes depreciation, insurance, fuel, maintenance, finance charges, and registration.
What is the biggest hidden cost of car ownership?
Depreciation, at $4,422 a year on average. It is the largest single ownership cost and the only one that never appears on a bill. New cars typically lose 15 to 20 percent of their value in the first year.
Is buying used really cheaper than buying new?
For most buyers, yes. A 2-to-4-year-old car has already absorbed 30 to 40 percent of the worst depreciation, so you inherit a smaller invisible cost on top of a smaller payment. That is why used cars dominate total-cost-of-ownership rankings.
Does fuel or depreciation cost more?
Depreciation, by a wide margin. At $4,422 a year it costs roughly twice what fuel does at 15,000 miles a year. Buyers obsess over MPG and ignore resale value; the math says to reverse that.