It’s a well known adage that when you buy a new car—despite that glorious new car smell—it tends to depreciate in value quite rapidly almost as soon as you drive it off of the lot. Though we’ve all heard it said, it can be hard to resist the lure of the newest models with all of the bells and whistles—and the added peace of mind that comes from a new car with a great warranty is hard to beat. When looking to purchase a new—or new to you—vehicle, it is a good idea to crunch the numbers and see what your options will really cost in the long run.
Luckily for us, AAA has released a helpful interactive tool to let you calculate how much it costs to own and drive a car for a year. AAA has divided their calculations into 9 categories ranging in size from “Small Sedan” to “Half-Ton Pickup Truck” which are all focused on cars using traditional fuels, and two additional categories of “Hybrid Vehicle” and “Electric Car.” AAA then used the 5 most popular vehicles sold in 2021 within each of these categories to make all of the calculations found within the tool. Though these 45 models obviously can’t cover the entire range of new cars purchased in 2021, it can give you an idea of whether that new beauty that you have been eyeballing is worth it.
The “Hidden” Cost of Buying Your Dream Car Brand New
Though it is easy to think that the cost of owning and operating a car just takes into account things like your monthly car payment, going to the gas pump, and changing out that air filter, the real cost of car ownership includes more than just that. We also have to take into consideration various taxes and fees like vehicle registration, your insurance costs, and the inevitable vehicle depreciation that—as mentioned before—really does occur.
The calculation that AAA uses for depreciation is based on the difference between how much you paid for the car new, and their “estimated trade-in value at the end of five years and 75,000 miles.” For example the depreciation on a vehicle in the small sedan category like a Volkswagen Jetta that is driven about 15,000 miles a year is $2,687. The depreciation on a car in the electric vehicle category, like a BMW i3, that is driven roughly the same amount is a whopping $5,362. Unlike smaller sedans, EVs are notorious for depreciating faster than their traditionally fueled counterparts. The fuel costs, however, of the EV are roughly half of those belonging to the small sedan.
Making It Count: The Cost of a New Car and the Price of Reliability
Though it is interesting to see what the math says, it is important to realize that the numbers don’t exactly tell the whole story. Say you have a long commute and put well over the 15k threshold of miles on your car every year. The math says that your car is depreciating in value from the miles you put on it and the everyday wear and tear. But you know that having a reliable car with a comprehensive warranty and all new parts equals a peace of mind that even a certified pre-owned car can’t provide.
Conversely, if you have a shorter commute, expensive taste, and an auto shop that you can trust, it may be worth it for you to avoid the new car lot and look into something pre-owned. Pre-owned cars can be a great way to get something a lot nicer than you thought you could afford at a fraction of the price. In particular—as we have seen above—used electric cars are often priced more affordably than their new counterparts because of said depreciation.
Make Sure To Do Your Homework Before You Buy Used
If you aren’t great with cars and want to be sure that you aren’t getting a used car that won’t blow up on you, there are a few things you can do. If you go shopping at a dealership, a certified pre-owned car may be a good option. Take a look at whether or not they are willing to give you a warranty. There comes a point where older cars aren’t eligible, but if it is just a few years old and they refuse to offer a warranty, you may want to look elsewhere. Finally, consider having your favorite auto repair shop take a look at your potential new car before you commit. If your seller won’t say yes to an independent inspection, that is a huge red flag.
If you want to take a look and see the cost of buying new looks like for you specifically, take some time to poke around with AAA’s tool. Not only can you get some ideas about what sort of money goes along with the car you have, but it is also helpful in seeing how a different type of new car can either cost or save you more money in the long run.
