Owning a Car Is Getting More Expensive. Here's How to Save.

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The world's post-COVID spike in inflation, which largely lasted from 2021 through 2023, hit consumers in just about every corner of their pockets.

One of the worst pinches came in the automotive market, where new and used cars alike rocketed higher in value as surges in demand smacked hard against global supply-chain disruptions and component shortages.

The good news? A touch of respite—vehicle prices have been slowly retreating for some time.

The bad news? Other factors are pushing the total cost of car ownership higher.

Read on as we look at what's pumping up the price of owning a car, and provide a few suggestions for bringing down that burden.

The Tea

List prices on vehicles, new or used, weren't exactly cheap prior to the pandemic. But Americans who sought out a fresh ride in the ensuing years were treated to some real sticker shock thanks to the effects of both COVID lockdowns and, eventually, Russia waging war on Ukraine.

WealthUp Tip: If you really need to save money, take a closer look at your budget—these are 20 expenses you could try to cut back on.

"Supply chain issues had significantly reduced the availability of key components needed for new vehicle manufacturing, which coincided with higher demand, driven by people seeking alternatives to public transportation and more stimulus cash on hand," says the Bank of America Institute. "As a result, there was a steep drop in domestic inventories, which resulted in a surge in the sticker price for new vehicles. And with consumers unable to find or afford a new model, they moved into the used market, steeply increasing prices there, too."

How steep?

The average transaction price for a new vehicle sat around $39,000 in early 2020. By the time price peaked near the end of 2022, that number had soared to nearly $50,000.

Used cars, meanwhile, listed at a shade under $20,000 on average in early 2020, eventually finding a ceiling a little above $28,000.

In other words, new and used vehicle prices jumped by 28% and 40%, respectively, in just a couple of years.

Since then, supply-chain issues have waned, and inflation generally has cooled. Indeed, car prices have actually come down from their peaks—as of May 2024, the average prices of new and used cars had dropped to $48,839 and $25,670, respectively.

That's great news for consumers, to be sure, but it's far from the entire picture. Indeed, Bank of America Institute points out several factors that have made the total "all-in" cost of auto ownership even more expensive despite relief in list prices:

  • "Interest rates for car loans have risen sharply since April 2022, increasing almost four percentage points for 48-, 60-, and 72-month loans. This translates to nearly a $100 monthly payment increase for a loan of $51.2K, the average new vehicle loan amount as of March 2024, according to internal Bank of America data."
  • "Insurance costs are rising, too. According to the Bureau of Labor Statistics' (BLS) Consumer Price Index (CPI) data, motor insurance prices jumped 22.6% YoY in April 2024. 
  • "Official data … shows motor vehicle maintenance and repair costs are up 35% compared to January 2020 and 8% YoY."

BofA notes that this might explain why owners are keeping their vehicles for longer, with the average age of a vehicle in the U.S. coming to 12.5 years in 2023—2.5% higher year-over-year, and 40% higher compared to 2001.

WealthUp Tip: Being frugal is good. But there are many ways to take it too far.

Unfortunately, whether you have to buy a new car or have the ability to hang on to yours for longer, you're still bearing at least some of these burdens.

Here's how you can lighten the load.

The Take

There's no single way to make the cost of automobile ownership drop like a rock. However, by putting a few tactics to work, you can pile up small savings into a significant cost reduction throughout your time owning your car.

Here are a few thoughts that address some of the resurgent drivers of inflation mentioned above:


  1. Improve your credit score: Pay off outstanding debts, avoid taking on new debt, and follow other credit best practices before you apply for financing. The higher your credit score, the better chance you have of getting a lower interest rate.
  2. Make a larger down payment: When you take out an auto loan, you pay interest on every dollar of that loan—thus, the less you borrow, the less you'll have to pay in interest over the life of the loan. A larger down payment is more painful now, but will ultimately save you over the long run. Consider this: If you finance a $50,000 vehicle across 60 months at 7% with no down payment, you'll end up paying $9,403 in interest. If you put down $5,000, you'll save $940 in interest payments.
  3. Select a shorter loan term: In a similar vein, paying off the car sooner will be more financially painful up front (thanks to larger payments), but it will also result in lower interest payments over the loan's life—for a pair of reasons. For one, simple math: the fewer months you have to pay interest, the less interest you'll be charged. If you finance a $50,000 vehicle at 7% with now down payment, you'll pay $9,403 in interest over a 60-month period, but just $7,471 across 48 months. But also, as a general rule, the shorter your finance period, the better the rate you'll get.
  4. Comparison-shop for rates: It's obviously most convenient to get financing directly from the automaker (or the automaker's chosen bank), but it's worth checking to see what kinds of rates you can get with other banks or, if you belong to one, your credit union.


  1. Comparison-shop for rates: Same deal as above. There's no reason to take the first rate you're quoted. And in case you weren't aware from the deluge of ads that talk about them, you can find a variety of comparison tools online.
  2. Look for discounts: Insurers will typically reduce your rate if you, say, have a history of safe driving, don't put many miles on your car, or insure multiple cars. Heck, some insurers will even give students a break if they get good grades.
  3. Bundle: You'll also typically receive discounts if you "bundle" your auto insurance with other policies (homeowners, renters, etc.).

Maintenance & Repairs

  1. Don't ignore regularly scheduled maintenance: Yes, oil changes, tire rotations, and other basic maintenance take time and cost money. But not following the manufacturer's recommended maintenance schedule could cause your car to break down much faster, lead to much more costly repairs, and jeopardize the safety of you and your passengers. (Here's a good video discussing what can go wrong if you don't change your oil, for instance.)
  2. Do minor maintenance yourself: You can save some money by learning how to perform basic maintenance (for example, changing your oil, air filters, and wiper blades). There is a risk here: Specifically, if you take on too-challenging tasks, or if you really botch the basic stuff, you could end up doing damage to your car. But some people enjoy getting to know their car a little better and can handle these minor maintenance tasks easily.
  3. Don't forget your warranty. Unfortunately, auto dealers won't always be eager to let you know whether certain repairs are covered under your warranty. Make sure you have a copy of your warranty handy should your car ever need repairs so you can ensure that covered work doesn't come out of your pocket.
  4. Use independent repair shops (sometimes). Dealerships typically charge more—sometimes much more—than your average independent repair shop for both maintenance and repairs. So you can save a lot by avoiding the dealership. But there are some drawbacks. The technicians might not have training specific to your vehicle, they might not have access to original equipment manufacturer (OEM) parts, and it's difficult to determine an independent shop's quality. Reading reviews can help, as well as checking to see whether the technicians have relevant certifications.

Riley & Kyle


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On the date of publication, Kyle Woodley did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.