23 Hidden Costs of Car Ownership

Buying a car is itself a big cost but certainly not the only one you’ll have as a car owner. There are 23 hidden costs of car ownership that most people don’t consider until the bills start adding up. Car insurance is the most expensive cost, possibly as expensive or even more so than your car loan payment. However, it is not the only thing you’ll be paying for. Check out all the costs of owning a car below, to see where you may be able to trim the fat from your expenses.

Key Takeaways There’s more to owning a car than car payments. Car insurance may be one of the most expensive expenses when it comes to owning a car. Car ownership costs vary, depending on where you live and what type of car you own.

1. Car Payments

The average new car payment is $734 a month and $525 for a used vehicle. ⁽²⁾ The price of cars has skyrocketed due to all the technological advancements automobiles have experienced over the years. Sensors and cameras abound and the average price of a new car is over $40,000.

2. Taxes

State sales tax varies by state, and the national average car tax is $1,182 per year. ⁽¹⁾ For instance, California’s sales tax is 7.5%, Texas’ is 6.25% and New York’s is 4%. Vehicle tax is applied at the time of purchase, whether you buy a new or used car. Even if you buy a car from another state, you must pay your state’s sales tax. Some states call this type of sales tax an “excise tax” and offer a flat rate while others consider the weight of the car along with other factors like fuel efficiency.

Title taxes is another term applied by some states, like Georgia and Maryland, to refer to sales tax on a vehicle purchase. Some states also apply a tax for title transfers. If you buy a car as a trade-in, the trade-in value may or may not be deducted from the full sales tax, depending on where you live

In some states you only pay taxes on the leased amount whereas elsewhere you may pay sales tax on the total vehicle value.

Leasing options often have different sales tax rules in some states. For instance, in some states you only pay taxes on the leased amount whereas elsewhere you may pay sales tax on the total vehicle value. Wherever it is you live and what the tax laws are, you can count on paying taxes when you buy a car or transfer a title from a private owner. ⁽³⁾

3. Title

A vehicle certificate of title proves you are the rightful owner of the vehicle. The lender mails you the title after the car has been paid off. If you buy from a private owner, you would have the title transferred to you. A transfer fee is roughly $15 to $150 depending on where you live.

The transfer process and cost varies by state. In some states, you may get a discounted fee for transferring from a family member to another. Make sure tickets and tolls are paid off by the previous owner or you may be buying yourself a small debt.

4. Personal Property Tax

In most states, car owners have to pay an annual property tax based on the vehicle’s value. In the following states, there’s no personal property tax on vehicles ⁽⁴⁾:

• Delaware: Personal property not taxable
• District of Columbia: Motor vehicles exempt
• Florida: Motor vehicles subject to license tax exempt
• Hawaii: Personal property not taxable
• Idaho: Registered motor vehicles exempt
• Illinois: Personal property not taxable
• Louisiana: Motor vehicles used on public highways exempt
• Maryland: Personal property not taxable
• Montana: Light motor vehicles exempt but subject to state registration fee based on age
• New Jersey: Registered motor vehicles exempt
• New Mexico: Registered motor vehicles exempt
• New York: Personal property not taxable
• North Dakota: Personal property not taxable
• Ohio: Personal property not taxable unless used in a business
• Oregon: Personal property required to be licensed or registered exempt
• Pennsylvania: Personal property not taxable
• South Dakota: Personal property not taxable
• Vermont: Motor vehicles exempt
• Wisconsin: Motor vehicles exempt

5. Registration

Registration and emissions fees vary by state. Some states charge a flat registration fee, while other states assess the registration fee based on the vehicle’s weight, vehicle age and other factors, like the city and county the car is used in, the value of the car and unpaid tickets and tolls. ⁽⁵⁾

Included in the price are fees towards highway patrol, transportation or road improvement fees and county fees. Registration fees are, on average, a few hundred dollars and usually drop as your car ages.

6. Emissions (Smog Tests)

You may pay anywhere between $30 and $75 to do a smog test, which is required upon renewal at different intervals that vary according to state laws. ⁽⁶⁾

7. Insurance

The biggest car expense, besides the car payment, is car insurance. In 2024, the average car insurance rate was $2,165 for full coverage and $596 for minimum coverage. ⁽¹⁹⁾

Sometimes, premiums are as expensive as the car loan payments. Whether it’s a spotty driving record or bad credit dragging down your insurance score, there are several other factors that determine what you pay in monthly premiums, and each insurer weighs these factors differently. It’s always a good idea to compare auto insurance rates to see who will offer you the best deal. Without comparing rates, you may pay much more than you need to.

In 2024, the average car insurance rate was $2,165 for full coverage and $596 for minimum coverage.

If you own a car that is worth more than $4,000, it’s a good idea to have full coverage – even more – in case of a total loss. If you’re financing or leasing a vehicle, the loan will require that you have full coverage, which includes both collision and comprehensive coverage, in addition to state mandated coverage, like liability coverage. You may also have to buy uninsured motorist coverage and or personal injury protection (PIP), depending on which state you live in.

Applying as many discounts as you can may reduce your monthly premiums as much as 25%. Consider discounts and ask the agents about all the ones they offer when you compare quotes.

You can also work towards lowering your car insurance rate over time by avoiding moving violations and filing claims.

8. Oil and Filter Change

Oil changes vary in price, depending on whether or not you need synthetic or full-synthetic oil, which can be pricey. On average an oil change can cost anywhere between $30 and $100.

It’s important to follow the car owner manual’s recommendations for oil types and the frequency of the oil change per mileage. For some cars, it may be every 6,000 miles or 10,000 or once a year, whichever comes first.

9. Battery Inspection and Replacement

Whether you have a gas-powered vehicle or an electric vehicle (EV), the battery of a car is very important. For an EV, an annual battery inspection is highly recommended. It’s also recommended that you not charge fully or very often, to lengthen the life of the battery, which can cost $4,000 to $36,000 to replace. ⁽⁹⁾

With a gas-powered vehicle, most batteries cost anywhere from $45 to $250 to replace. ⁽⁸⁾ Replacing a car battery every three to five years is what most car owners need to do. You’ll know if you need to change the battery if there is a slow engine start up that sounds like the engine is struggling to crank up. Your headlights may become dimmer. Or you may notice the windows roll down more slowly. ⁽⁷⁾

10. Gas

Gas prices differ in each state, and people with EVs and hybrids are spared much of this expensive cost. The average gas price in the U.S. was $3.13 at the time of reporting, but in states like California, the average price was as high as $4.42 or even lower than $2.74, which it costs in Texas.

How much you spend on gas largely depends on the vehicle you drive and how much you drive it.

11. Electricity or Charging Station

If you have an EV or hybrid that you charge at home, the faster you charge, the more expensive it is. However, charging at home is the cheaper option. ⁽¹⁰⁾ It’s also not good to fully charge a vehicle or charge it very frequently, if you want to preserve the life of the battery. The cost will also vary depending on which state you live in, the size of the battery and what time of day you charge the vehicle. ⁽¹¹⁾

When using an EV charging station, it’ll cost anywhere between $10 to $30 with a level 3 charger.

12. Tire Rotations

Unless you’re buying two new tires and the shop does it for free, a tire rotation will cost roughly $60-$72 or $112 to $132 for a tire rotation and balance. It’s important to have a tire rotation according to the owner manual of the vehicle. Most industry experts suggest every 5,000 to 7,500 miles.

13. Tires

Buying new tires and rotating them as per the vehicle’s owner manual will cost money. Tires can range in price from $50 to $1000 a tire. ⁽¹⁴⁾. Find out what size tire fits your vehicle and see if the manufacturer recommends a certain brand. Pricing how much the ideal tires cost before you buy a car helps you gauge how much you’ll spend on tires on a regular basis. ⁽¹⁴⁾ For a person who drives 12,000 to 15,000 miles a year, a new set of tires will last about three to five years. ⁽¹⁵⁾

14. Interest

You pay interest on a car loan and interest rates may be as low as 5% on a new car and as high as 22% on a used car. ⁽¹⁶⁾ The higher your credit score, the lower the interest rate you can secure in car payments. The age of the car will also determine how much interest you pay because newer cars have lower interest rates. You’ll pay less each month if you extend the life of the loan but you’ll pay more in interest fees overall.

Even with a lease, you pay interest, which is rolled into the monthly payment. The interest rate on a leased car is also called, “the money factor.” ⁽¹⁷⁾

15. Depreciation

An indirect hit on your wallet is depreciation. Vehicles depreciate, or lose value, over time, so you’re losing value in an asset that you own.;

16. Leasing Fees

There are a lot of hidden costs called leasing fees when you lease instead of financing a car. In addition to car payments, you’ll have to pay:

• A downpayment

Usually, people put down a downpayment when they lease a car. In order to qualify for certain leasing terms you may have to pay a portion upfront. If you don’t need to pay a down payment, your monthly car payments will be higher.

• A security deposit

A security deposit on a car is usually a month’s car payment but could be more. The security deposit is meant to cover damages to the car’s interior and exterior. It is returned if there are no damages.

• Acquisition fee

Basically, acquisition fees are paperwork fees the dealership charges and they can vary depending on the dealer. Expect to pay a few hundred dollars along with the downpayment, if you pay one.

• Disposition fee

The disposition fee is roughly in the amount of one car payment. It is used to clean and make fixes to the car for reselling it after you turn in the vehicle.

• Sales tax

You may pay this upfront or it may be added to the lease payments, but even though you’re not buying the car, a sales tax is added to the price of the car. Taxes vary depending on the state and county you live in.

• Wear and tear expense

At the end of the lease, you may be charged for wear and tear. This may come out of your security deposit but you may have additional fees, depending on how well you took care of the vehicle while it was in your possession.

• Mileage charges

If you go over the mileage in your lease contract, you will be charged extra at the end of the lease, possibly up to 25 cents a mile. Low-balling the mileage for a cheaper monthly car payment is not advised because you’ll pay much more at the end of the lease term. ⁽¹⁸⁾

• Contract termination charges

If you choose to terminate your lease earlier than the contract you signed, there will also be a contract termination fee, which could be as large as paying the remainder of the lease. ⁽¹⁸⁾

17. Service Plans

You may save money on maintenance charges with some service plans and not so much with others. It’s a good idea to do some research before buying a car to find out what that car’s oil and filter changes cost and tires, as well as other vehicle-specific maintenance checks.

For EV shoppers, it’s a good idea to look into the vehicle’s battery shelf life. Service plans for EVs often cover the battery, in case it needs to be replaced. The cooling and fluid systems still need to be checked and/or changed, just as with a gas-powered vehicle. Brakes and brake pads will also need to be replaced every so often. ⁽¹³⁾

Service plans for EVs often cover the battery, in case it needs to be replaced. The cooling and fluid systems still need to be checked and/or changed, just as with a gas-powered vehicle.

18. Tolls

You may or may not need to use toll roads, but if you save precious time commuting by using toll roads, you may spend as much as several hundred dollars a month for toll fees, especially if your vehicle is rated higher due to the number of axles and other factors that vary by state. You may also need to buy a responder, depending on where you live.

19. Annual Inspection

If you have a service plan (see #17) your cost will be included in the plan’s monthly fees that are sometimes rolled into the car payments. If you didn’t opt for a plan, it may cost you more, unless you have a trusted mechanic, who may inspect your vehicle at no cost unless you need repairs.

Most mechanics will charge you something to check the fluids and systems, brakes and tires. Getting the car checked out when you get an oil change, at least once a year, is a great way to prevent future repairs.

20. Anti-theft Device

New cars may come with an immobilizer, an anti-theft device that’s built in, but many people have to buy a proper anti-theft device, especially if they live in or park in high-crime areas. Anti-theft devices can range from a car alarm to an intricate tracking system. The cost varies from $25 to thousands, depending on the type of device you buy.

21. Warranty

Most new cars have a limited warranty at no cost and some people choose to buy an extended warranty on the car, which does have a cost. A manufacturer warranty is both less expensive and more comprehensive than a third party warranty. Warranties often have mileage limits and vary in price depending on the vehicle. A warranty may cost $1,000 a year or several thousands of dollars a year.

22. Dealer Preparation Charges

You only pay this fee when you buy a car at a dealership or through an online dealership, like Carvana. Sometimes the dealer preparation charges are called a “documentation fee.” Either way, this is a fee for doing all the necessary paperwork to hand off the car with all the necessary boxes checked.

23. License Plate Fees

License plate fees are usually charged annually and can vary by state. Usually it’s paid when you pay for registration. Customized license plates pay higher fees.

As of 2024, Georgia tops the list as the most expensive state to own a car in and is followed by Louisiana and Florida.

Average Cost To Own a Car by State

As you can see below, car costs vary greatly. As of 2024, Georgia tops the list as the most expensive state to own a car in and is followed by Louisiana and Florida. Severe weather is a large factor that increases car ownership costs because car insurance premiums are so much more each month.

Average rates compiled from Bankrate Study (1)

How To Lower the Cost of Car Ownership

• Buy a Used Car or Keep an Older Car
• Buy a Less Expensive Car
• Choose a Car With Less Expensive Maintenance Costs
• Consider Solar Panel To Offset EV Charging Costs
• Drive Less
• Move to a Home With a Garage for Lower Insurance Rates
• Move to a Safer Neighborhood With Lower Prices
• Improve Your Credit Score
• Compare Car Insurance Quotes