The Cost of Owning a Car in the U.S.

Owning a car in the U.S. is expensive and will likely be your second biggest expense after housing. To save money, always use public transportation as a primary source of transportation. If you do not have access to public transportation and must buy a car, it is important to understand the expenses involved in owning a car in the U.S.  

Loans and Payments 

Most car owners will provide an initial cash down payment of 10-20% of the car’s cost, after which they then have a monthly loan payment.  On top of that, almost every state charges sales tax on the purchase of a car. Sales tax varies by state. Depending on the state in which the purchase is made, you will pay anywhere from 0% sales tax to around 8%. Each state sets its rate.  

Insurance  

Insurance will most likely be the second biggest expense in owning a car. In the U.S., the cost of insurance can vary widely depending on the state, your driving record, and the amount of insurance coverage purchased.   

Repairs and Maintenance  

You will have to spend money to maintain your car, from oil changes to tire replacements to windshield wiper replacements. If your car doesn’t have a warranty, unexpected major repairs can cost thousands of dollars, plus towing it to a mechanic. Even if your car has a warranty, you will be responsible for the cost of repairs when the warranty expires.  

Gas  

If your car runs on gasoline, you will have to keep your tank filled. The price of gasoline goes up and down. To better understand how much you might spend on gasoline, if your car gets 20 miles to the gallon, at $5 per gallon, it will cost $25 in gas to drive 100 miles.  

Registering Your Car  

You must pay for license plates, title (a document proving you own the car), and register the car annually in your state. Depending on the state, registration fees range from around $20 to $225 a year. In some states, fees can also depend on factors like age, weight, or the value of the car.  

Inspection  

To make sure your car is in good operating condition and meets air pollution standards, almost every state in the U.S. requires that you pay an annual inspection fee. State inspection fees across the U.S. average around $35 a year. If you fail inspection, you will have to spend money to fix the problem and sometimes pay another fee to verify that it is fixed.  

 Driver’s License Fees  

You will have to pay for a driver’s license, and you may also have to pay for driving school in preparation for a road test. Depending on the state, driver’s licenses are generally valid for around 4-8 years, and then they must be renewed for a fee. But the initial cost across states averages around $50.  

Parking  

There will be times when you will pay for parking. If you park illegally, you may receive a ticket and be required to pay a fine. Some apartment buildings also charge residents for parking.  

Tolls and Fees  

In many parts of the U.S., you must pay to use roads and bridges. And, to reduce traffic and pollution, some cities in the U.S. are currently proposing “congestion pricing,” where you must pay a fee to drive in a city.   

 Auto Excise Taxes  

About half the states in the U.S. now tax the owners of cars. You will receive a yearly tax bill if you live in a state with auto excise taxes. The age and value of your car will determine the amount you will pay. 

Remember: As a rule, you should not spend more than 15-20% of your take-home household income on the total expenses of owning the car.  If it is an option, living near reliable public transportation and occasionally renting a car, using car share, and biking or walking are choices that can help you live a more financially responsible and less stressful life.