Jeff Clemishaw for The General
The cost of owning a car has steadily risen over the past two decades, but 2023 and 2024 saw massive jumps, according to the Bureau of Transportation Statistics. In 2025, Americans are starting to feel the weight of additional car-related expenses.
The most recent consumer expenditure report from the Bureau of Labor Statistics reports that transportation expenses are 17% of an American’s total spending. These numbers, coupled with rising housing and grocery costs, are a substantial concern for households across the nation.
To break down why car ownership costs are rising, The General has taken a look at the major reasons for this increase, including insurance premiums, tariffs, and maintenance. This information will assess economic impacts and predict what the road ahead looks like for consumers.
Current car ownership costs: A visual breakdown
The sticker price of a new or used car is just a fraction of what you’ll pay over the lifespan of the vehicle. From financing interest and registration costs to fuel, maintenance, and insurance, expenses compound quickly.
The American Automobile Association publishes an annual report that outlines what the average American will spend on car ownership in a year. Their methodology uses data from Vincentric, LLC and uses standardized criteria to predict annual costs based on estimations over five years and 75,000 miles driven (15,000 miles per year).
The main factors that affect ownership costs
Depreciation, fuel, and insurance are the three primary factors involved in total ownership costs. Additionally, the costs associated with all three of these categories are rising. This has a substantial impact on the amount an individual can spend on a car, their spending in other aspects of their life, and their ability to save.
Rising insurance premiums
Auto insurance costs have skyrocketed over the last decade. Using data compiled from the Bureau of Labor Statistics, the Federal Reserve Bank of St. Louis found the average consumer spent $1,775 on car insurance in 2023, up from $1,575 in 2020.
This upward trend is continuing, as suggested by a 2024 report from Consumer Reports, which found that 60% of surveyed auto insurance policyholders experienced a premium increase in the last year. According to that report, this rise is influenced by higher car repair costs, more severe weather patterns, and increased car thefts.
Depreciation and financing
More than 80% of new car purchases are financed, according to the National Automobile Dealers Association. As such, financing and annual depreciation have a significant impact on the yearly cost of ownership of a vehicle.
Car loan rates are also at an all-time high, according to Statista. Rates peaked in February and June 2024 at around 7.9% and have since only dropped to 7.2%. Just four years ago, this rate was 3.8%. AAA has also reported that financing fees were 6% higher in 2024 than in the previous year.
Increased repair costs
In an analysis of Bureau of Labor Statistics data, the Federal Reserve Bank of Minneapolis reported that car repairs cost 17% more in 2023 than they did the year prior. This is mostly attributed to an increase in older vehicles on the road. As new vehicle prices have soared, many consumers have opted for used vehicles. These vehicles require more repairs, resulting in an increased demand for auto repair labor. In turn, this has inflated labor costs.
2025 tariffs have forced this trend to continue. Auto parts are more expensive because of the tariffs, a 25% additional cost added to imported parts, as many are manufactured overseas. This financial burden is passed directly onto the vehicle owner.
Other factors at play
Many global factors are influencing the cost of vehicle ownership, including tariffs, fuel costs, and more expensive vehicle production.
Tariffs
Many of the international tariffs put in place by the U.S. government have pushed vehicle costs higher. New vehicle imports have a 25% tariff. While 25% may not be a large increase for smaller-ticket items, it’s substantial for vehicles. As of January 2025, Kelley Blue Book reports that the price for a new vehicle is $49,740, which is close to an all-time high.
Fuel costs
While average national gas costs are lower than the all-time high of $5.03 in June 2022, they are still higher than historical averages. Just five years ago, the price per gallon was $1.93. Today it is around $3.13. This is directly felt by consumers every time they get in their vehicle and drive somewhere.
Technology integrations in vehicles
Cars are becoming more complex with the integration of advanced vehicle technologies. These technologies, such as emergency braking, lane departure warnings, and blind spot intervention, make driving safer for everyone on the road. However, they do result in higher vehicle repair costs.
A survey by the Government Accountability Office found that 10 out of 14 independent repair shop stakeholders thought that these technologies limit the ability of some technicians to make repairs. This results in visits to more specialized repair shops at a higher cost for the vehicle owner.
Regional differences
Car ownership costs can vary from state to state. For example, Nevada is the most expensive state to own a car in, according to MarketWatch Guides. Drivers in this state have average annual insurance premiums of $2,889 and a total yearly ownership cost of $7,392.
Alaska, on the other hand, is the least expensive state. Its insurance premiums are only $1,978 per year with a total yearly ownership cost of $3,471.
Economic impacts and the future outlook for consumers
Rising car ownership costs directly affect household finances. If more money is spent on having and maintaining a vehicle, less money can be allocated to other consumer categories like leisure, shopping, and groceries.
Although inflation has begun to slow from recent highs, it is unlikely that vehicle purchase, repair, and insurance premium costs will go down. Consumers should be prepared to adapt to these changes.
Conclusion: High vehicle ownership costs are the new norm
Car ownership is a central feature of American life, but families are finding it increasingly expensive to own and operate their vehicles. These increases are due to a myriad of factors, including economic changes, higher insurance premiums, and more expensive repair costs.
Data from the Federal Reserve banks, the Bureau of Labor Statistics, and industry organizations suggest that increased car costs are here to stay, resulting in a lasting financial burden for U.S. households. Ultimately, consumers should begin accounting for this shift and look for ways to secure their financial future by saving on insurance premiums, repair costs, and financing terms.
This story was produced by The General and reviewed and distributed by Stacker.
