A new report by the American Automobile Association (AAA) indicates new car ownership costs have reached its highest levels since the automobile travel firm began tracking costs in 1950.
A new car will have an annual average cost of about $9,282, or $773.50 per month, based on owners driving about 15,000 miles per year.
AAA suggests rising costs are mostly associated with increased borrowing costs as higher rates and longer term loans are overburdening consumers. The second highest costs are fuel then maintenance.
The Autoblog said, "the finance portion of the annual vehicle cost rose 24% this year compared to 2018."
While the average cost per year is $9,282, the amount of money a consumer could spend will significantly depend on the type of car.
The report said small gas-powered cars cost about $7,114 per year. Pickup trucks and SUVs average well over $10,000. A breakdown of the costs are seen below:
- Small Sedan: $7,114
- Hybrid: $7,736
- EV: $8,320
- Small SUV: $8,394
- Medium Sedan: $8,643
- Medium SUV: $10,265
- Large Sedan: $10,403
- Pickup Truck: $10,839
Small sedans appear to be the real winner for affordable transportation, meaning that fuel costs and debt servicing payments are somewhat manageable for the bottom 90% of Americans.
Hybrids and electric vehicles also have reduced fuel costs but suffer from high upfront costs and the highest depreciation costs across all automobiles, something we outlined last month.
As cars get more complicated, like the addition of batteries, costs rocket higher and values depreciate quicker. Even without batteries, consumers are gravitating towards SUVs and trucks, more than 70% of new vehicle purchases today have been larger size vehicles thanks to low borrowing costs.
"It’s definitely pulled (the average) up because those vehicles are more expensive to own and operate," said Mike Calkins, principal author of the study for AAA. "Pickup trucks are really big right now, and those are the most expensive vehicle to own and operate by a good margin."
Consumers on average are spent $32,590 in Aug., up 5.2% YoY, according to car-buying advice site Edmunds. The average interest rate was 5.8%, the same as a year earlier, but the average loan terms are being pushed out to almost 70 months!
And with Americans paying the most ever to have their vehicles on the road, if that is through debt servicing payments or maintenance costs or even fuel costs, it seems that many could be on the path to financial ruin as subprime auto loan delinquencies – 90 days or more past due - in 2Q19, have just had "the biggest 12-month surge since 2010."
Couple record high transportation costs and skyrocketing subprime auto loan delinquencies with an economic slowdown that is materially getting worse -- this could suggest that pain is about to be inflicted on the consumer, at a time when sentiment is already starting to shift lower.