Buying a Car Can Be a Huge Waste of Money — Here's Why

Cars have long been symbols of freedom and status. Buying a first car is one of the milestones of becoming an adult, and for many, driving is a part of daily life. But especially in the era of Lyft and Uber, it might be time to rethink the idea of car ownership — because it’s a huge waste of money. When you look at the actual expenses that come with car ownership, you start to realize just how crazy it is to spend so much on an item that spends most of its time in the driveway. Do you wonder about the expense of car ownership? Tell us about it in the comments.

Related:32 Lies Your Mechanic Has Told You

If you’re planning to buy new, be aware that vehicle loses value the instant you drive it off the lot. On average, a car loses up to 20% of its value in the first year of ownership. During the first five years, the value decreases by about 40%. If you paid $40,000 for a car five years ago, that car is worth only about $24,000 today.

Related: These Cars Depreciate the Least (and Most)

If you need to take out a loan to buy a vehicle, you’ll pay interest on the balance for years. As of August, average interest rates for new-car loans were 8.98% with a credit score of 750 or higher. Used-car loan interest rates for the same credit score were 9.23%, and rates climb steeply if your credit is 600 to 699, averaging 15.40% for a new-car loan and 15.65% for a used-car loan. Thanks to these rates, you’ll pay more than the purchase price. While you can avoid interest by buying a car outright, that can be hard when used-car prices average more than $20,000 and new cars cost an average $36,000.

Related: Signs The Car Dealership Is Ripping You Off

If you live in a climate with sub-freezing winters and where roads are treated with salt, every time you drive in the winter, you’re slowly destroying your car. The United States uses more than 48 billion pounds of road salt every winter. And that salt eats away at metal, including the undercarriage of your car. If you want to protect your vehicle, oil undercoating treatments cost $100 or more annually. 

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Car insurance is another major bill that comes with car ownership. If you buy minimum coverage, you can expect to pay an average $545 per year, while full coverage runs about $1,771. You need to meet your state’s minimum requirements, but if you’re in a crash with minimum coverage, you could still be responsible for expenses such as vehicle repair costs or medical bills for the other driver involved. If you do get into a collision, your car insurance costs can jump by as much as 93%.

Just keeping a vehicle gassed up can empty a wallet, and that’s before accounting for when the price of gas climbs like it did last summer. Drivers pay an average $109 monthly in gas for a subcompact car; for a midsize car, about $129; a subcompact SUV, about $144; full-size cars, about $169; and SUVs, about $184. When gas prices increase by $1 per gallon, the average American spends an extra $56 monthly in gas.

While an electric vehicle can save money on gas, be prepared for additional expenses. Installing a charger in your home can cost between $1,000 and $2,5000, with $1,200 being about average for a 240-volt outlet, charger, and wall-mounted system. Then you’ll need to factor in the cost of electricity. And if your vehicle’s battery needs to be replaced? Be prepared to shell out $2,000 to $10,000 or more.

While $70 for an oil change here and there might not seem like a major expense, if you consider all of your vehicle’s maintenance needs over a year, you’ll find you’re probably spending way more than you think. Oil changes average $35 to $75, tire rotations cost about $24 to $100, and brake pad replacements cost $115 to $300. Let’s say you pay $50 for oil changes and $50 for tire rotations every 5,000 miles, and that you replace your brake pads for $200 every 20,000 miles. Even if you drive a conservative 20,000 miles a year, you could be looking at $600 or more in standard maintenance costs.

While keeping up with routine maintenance can help keep a vehicle running smoothly, if you own a car for more than a few years you’re bound to have to make repairs. Those bills can be surprisingly expensive: Average repair costs for a flat or blown tire are $10 to $250, while dead batteries often run $45 to $350. Transmission issues can cost $1,200 to $6,000, and even a minor collision can cost $50 to $3,000 to fix.

If you rely on your personal vehicle to commute to work, pick the kids up from school, or for other essential tasks, you’ll find it surprisingly difficult to go without. That means if you’re in a crash or your car breaks down, chances are you’ll need to get a rental vehicle. Rental car prices spiked during the pandemic and remain high, particularly if you’re in a tourist area or near an airport. Booking a rental car seven days in advance will cost an average $513 for a week, but be prepared to pay higher prices for a last-minute rental.

While you pour thousands of dollars into a car each year, it spends the majority of its time just sitting. Americans drive an average eight hours and 22 minutes weekly — so your car probably sits for nearly 160 hours out of every 168-hour weeks. That’s a lot to shell out for an item you use so infrequently. If you’ve been toying with the idea of going without a car, or even going with one less car in your household, now might be the time to try it out. Just think of the many things you could do with the money you save.