Owning a car is as much a part of the American Dream as owning a home—and can be nearly as expensive if you look at the total cost of ownership. In a 2015 study, AAA calculates that the cost of owning an average car that’s driven 15,000 miles a year is $8,698 annually, or about $725 a month, once you consider the car payment, car loan financing costs, taxes, insurance, fees, gas, maintenance, and depreciation. In this scenario, the average car loan payment is $482 a month, which means the additional out-of-pocket expenses raise the final cost by about 50-percent.
Unfortunately, many people forget to account for all the extra costs of car ownership when buying a car, which can get them into trouble down the road. You can minimize your risk of taking on a larger car loan than you can actually afford by using tools like NADA or Kelley Blue Book’s Five Year Cost of Ownership Calculator before you buy your next car. You can also reduce your total car expenses even further by choosing to become a one-car household rather than maintaining two or more vehicles.