Average car cost per year: 7 numbers your brain rounds down

Owning a new car now costs an average of $11,577 per year, about $965 every month, according to AAA's 2025 Your Driving Costs study. If that number feels too high, you're in good company: research published in Nature found that drivers underestimate the total cost of owning a car by roughly 50 percent. You're not bad at math. Your brain files car costs into half a dozen different mental drawers, and it only ever opens one or two of them at a time. This post walks through the seven numbers that make up the real average car cost per year, why your brain rounds each one down, and what actually helps.

Table of Contents

• Why the average car cost per year matters
• 1. Depreciation: the cost you never see leave your account
• 2. The car payment: the only number your brain takes seriously
• 3. Insurance: the price of maybe
• 4. Fuel: the one cost you estimate right, and why that's the trap
• 5. Maintenance and repairs: the bill your future self keeps getting
• 6. Registration, taxes, and fees: the paperwork pile
• 7. Parking, tolls, and tickets: the rounding errors that aren't
• What ties these seven numbers together
• Frequently asked questions

Key Takeaways

Why the average car cost per year matters

Most people, when asked what their car costs, quote their monthly payment and maybe gas. That answer feels complete because those are the two costs that show up as visible, recurring transactions. Everything else arrives irregularly, invisibly, or disguised as an emergency.

That gap has a real price. The Nature research on car ownership costs found that people estimate fuel almost perfectly but drastically underestimate depreciation, insurance, repairs, and taxes. The researchers argued that if drivers saw the true total, many would make genuinely different decisions about what to drive and how to get around.

This isn't about whether you should own a car. For most people that's not a choice, it's a requirement of geography. This is about the strange fact that the second biggest expense in most households is the one people can estimate least accurately. Not because they're careless, but because no bill ever arrives that says "total cost of your car this year." Your brain can't add up receipts it never sees. If you've read our breakdown of the annual cost to own a car, consider this the companion piece: less about the expense categories themselves, more about why your brain gets each one wrong.

"Nobody underestimates their rent. People underestimate their car because the cost arrives in seven disguises."

1. Depreciation: the cost you never see leave your account

The single biggest cost of car ownership is one you will never see on a bank statement. AAA's 2025 data puts average depreciation at $4,334 per year for a new vehicle. That's more than most people's insurance and fuel combined, and it happens silently, every day, whether you drive or not.

Call this one the invisible odometer. Your brain tracks money through transactions: a charge appears, you feel it, you file it. Depreciation never triggers that system because there's no moment of payment. The money leaves through the slow erosion of what your car is worth, and your brain treats value you can't see leaving as value that isn't leaving.

You've probably felt the delayed version of this. You go to sell or trade in a car you bought five years ago, see the offer, and feel a small jolt of disbelief. That jolt is five years of invisible cost arriving all at once. One useful move: once a year, look up your car's current market value and write down the difference from last year. You're not doing anything with the number. You're just letting your brain see the transaction it's been missing.

2. The car payment: the only number your brain takes seriously

If depreciation is invisible, the payment is the opposite: it's the one car cost your brain treats as the whole story. The average payment is now $767 a month for a new car and $537 for a used one, according to Experian's data on auto loans.

Here's the mechanism: the payment becomes an anchor. When a number is presented to you as "the cost," your brain latches onto it and evaluates everything else as small adjustments around it. Dealers understand this deeply, which is why the entire conversation at a dealership revolves around monthly payment rather than total price, total interest, or total cost of ownership. A $42,000 loan sounds like a decision. "Around $700 a month" sounds like a Tuesday.

The payment is real, but it's roughly half the story. If you're paying the average new car payment, you're spending about $9,200 a year on the loan alone, before insurance, fuel, maintenance, or the depreciation quietly running underneath it. If a car purchase is on your horizon, our guide on how much to save for a car digs into how to size that decision around your actual life instead of a dealer's anchor.

Pro Tip: Before any car decision, multiply the monthly payment by 24. "$700 a month" and "$16,800 over the next two years" are the same fact, but your brain treats them very differently. The second framing recruits the part of your brain that thinks in consequences.

3. Insurance: the price of maybe

Insurance occupies a strange place in your mental accounting: it's a significant cost that buys you a thing you hope never happens. Bankrate's analysis puts the average cost of full coverage at $2,638 per year, which works out to about $220 a month whether or not anything ever goes wrong.

Because insurance pays for "maybe," your brain resents it in a way it doesn't resent fuel or repairs. Paying for something invisible feels like losing, so many people set their policy once, autopay it, and never look at it again. That avoidance is understandable and expensive: rates have climbed sharply in recent years, and staying with the same insurer out of inertia often means quietly absorbing increases you never agreed to think about.

The fix isn't becoming an insurance hobbyist. It's one calendar reminder a year to spend 30 minutes comparing quotes. That single low-effort habit is one of the few places in car ownership where a meaningful amount of money can be recovered without changing anything about how you live.

4. Fuel: the one cost you estimate right, and why that's the trap

Here's the most interesting finding in the research: fuel is the one car cost people estimate almost perfectly. The Nature study found fuel estimates were nearly accurate while everything else was wildly undercounted.

Call it the fuel illusion. Fuel is the cost you pay for standing at a pump, watching a number climb, several times a month. It's vivid, frequent, and physically felt, so it dominates your sense of what the car costs. Then your brain does something sneaky: it treats its accuracy about fuel as evidence that it's accurate about the whole picture. You know exactly what you spend on gas, so it feels like you know what you spend on the car.

Meanwhile fuel is one of the smaller lines in the ledger. At AAA's 2025 average of 13 cents per mile, a typical 15,000-mile year costs about $1,950 in fuel, which is less than half of what depreciation is costing you over the same year. The vivid cost gets the attention, and the quiet costs get missed. It's the same pattern that makes subscription creep so effective: what your brain doesn't repeatedly see, it doesn't count.

"Your brain doesn't track what things cost. It tracks what paying for them feels like."

5. Maintenance and repairs: the bill your future self keeps getting

Maintenance runs about 11 cents per mile, roughly $1,650 a year at typical mileage, based on AAA's 2025 figures. But almost nobody experiences it that way. Maintenance arrives as a $90 oil change here, an $800 brake job there, a $1,400 surprise in a bad month.

The psychology at work is present bias: costs that arrive later feel smaller than costs that arrive now, so "I'll deal with the tires next quarter" always feels rational in the moment. The problem is that deferred maintenance isn't skipped maintenance, it's maintenance with interest. Small services postponed become large repairs delivered, usually at the least convenient time, which is exactly when an expensive surprise is most likely to trigger a stress spiral and a cascade of other unplanned spending.

What helps isn't discipline, it's expectation-setting. If you mentally book $140 a month as "the car's health care," a $600 repair stops being a crisis and becomes four months of an expected cost arriving at once. Same money, completely different nervous system response.

6. Registration, taxes, and fees: the paperwork pile

License, registration, and taxes add several hundred dollars a year, around $800 annually in AAA's cost breakdown. It's not the biggest line, but it's the one your brain is most likely to count as zero.

These costs share three features that make them mentally invisible: they're annual rather than monthly, they're framed as bureaucracy rather than spending, and they arrive as obligations you can't negotiate. Your brain files them the way it files weather. They happen to you, so they don't feel like part of what the car "costs," even though they only exist because the car does.

The accounting rule worth adopting: if the expense disappears when the car disappears, it's a car cost. Registration, inspection fees, property tax on the vehicle, the parking permit for your street. All of it belongs in the yearly number.

7. Parking, tolls, and tickets: the rounding errors that aren't

The last category is the pile of small charges that never make it into anyone's estimate: the $4 toll, the $15 parking garage, the airport lot, the occasional ticket. Individually they're rounding errors. Together, for many drivers, they quietly add up to several hundred dollars or more per year, and for city drivers who pay for parking, they can rival the fuel bill.

Small, irregular charges exploit a specific weakness in mental accounting: anything below your "worth tracking" threshold gets rounded to zero at the exact moment it happens, and a cost rounded to zero at the moment of payment never gets added to any total later. There's no memory to retrieve because your brain never wrote the entry.

This is where a denominator changes everything. As we've written about in why your brain needs a denominator, a number only means something when it's compared against something else. "$4 toll" means nothing. "Roughly $500 of tolls and parking this year" is a real number your brain can actually weigh.

Pro Tip: You don't need to track every toll forever. Pull up two or three months of card statements once, search for parking and toll charges, multiply by four, and you have your annual figure. Twenty minutes, one time, and this entire category moves from invisible to known.

What ties these seven numbers together

Each of these seven costs slips past your awareness through a different door: depreciation has no transaction, the payment anchors too hard, insurance buys an invisible thing, fuel creates false confidence, maintenance arrives as surprises, fees masquerade as weather, and small charges get rounded to zero on contact. Your brain isn't failing at any of this. It's running transaction-based accounting on an expense that mostly doesn't generate transactions.

That reframe matters because the usual response to discovering the real number is a wave of guilt, and guilt is a terrible accountant. The goal isn't to feel bad about a decision you've already made and probably couldn't avoid. It's to see the whole number clearly, because every downstream decision gets better when the input is real: whether to repair or replace, whether the second car earns its keep, what "affordable" actually means for the next one, and what every purchase truly trades off against.

Awareness, not restriction. The average car cost per year isn't a verdict on you. It's just a number that's been hiding in seven pieces, and you've now seen all seven.

See your own patterns clearly

Cars are one place your brain undercounts what things cost, but the same mental accounting quirks show up across all of your spending, and they show up differently depending on how you're wired. The spending personality quiz takes about two minutes and shows you which patterns are running in the background of your decisions. And if you want the bigger picture of how Impause approaches money, it starts exactly where this post did: no shame, just data.

Frequently asked questions

What is the average car cost per year?

AAA's 2025 Your Driving Costs study puts the average at $11,577 per year for a new vehicle driven 15,000 miles annually, or about $965 per month. That total includes depreciation, financing, insurance, fuel, maintenance, and fees, not just the loan payment.

How much should I set aside each month for my car?

For a new car, roughly $950 to $1,000 a month covers the true all-in average, though your number depends heavily on the vehicle's age, your insurance rates, and your mileage. The most commonly missed pieces are depreciation and irregular maintenance, so build those in rather than treating them as surprises.

Why do I underestimate what my car costs?

Research shows drivers underestimate total ownership costs by about 50 percent, mostly because the costs arrive in forms your brain doesn't register as spending: depreciation has no transaction, maintenance is irregular, and fees feel like bureaucracy. Fuel is the exception people estimate well, which creates false confidence about the rest.

Is it cheaper to keep an older car than buy a new one?

Usually, yes. Depreciation is steepest in a vehicle's first years, so an older, paid-off car typically costs meaningfully less per year even with higher repair bills. The honest comparison is your car's real annual repair total against the full yearly cost of a replacement, not against a monthly payment alone.