Study: Car ownership costs Americans nearly $7,000 per year in hidden expenses

According to Bankrate’s new Hidden Cost of Car Ownership Study, the hidden costs of owning a car average $6,684 annually in the U.S. Years of unpredictable inflation and volatile auto insurance rates have transformed car ownership, one of America’s most foundational elements of financial independence, into a budgetary burden for many drivers.

To uncover how much drivers in each state pay per year in hidden auto expenses, we evaluated four key metrics for gas-powered automobiles: car insurance, gas, maintenance and repairs, and vehicle taxes. We also completed a state-by-state analysis of the most and least expensive hidden costs, along with our experts’ tips on safeguarding your finances and mitigating the impact of hidden car ownership costs.

The average hidden cost of car ownership is $6,684 per year

When it’s time to buy a new car, we’re often fixated on the down payment details and crunching those monthly lease or loan figures, but there are other costs that tend to fly under the radar. Drivers usually know they need to pay taxes and car insurance, but they might not know how much these bills will add up to until they’re ready to sign on the dotted line.

And the hidden costs don’t stop there. Along with car insurance, gas, taxes, maintenance and repair costs constantly fluctuate and can dramatically increase without much notice or alternative. On average, the hidden cost of car ownership adds an extra $557 per month to your transportation budget in addition to your monthly car payment.

The hidden cost of car ownership varies between states, drivers and vehicles. To compare between states, we created a profile for a 40-year-old driver with a clean driving record and good credit. The vehicle selected for the profile is a 2022 Toyota Camry with full coverage car insurance. By keeping these characteristics the same for every state, we can see how other factors like gas price, annual mileage, maintenance and repairs, and state taxes influence these hidden expenses regionally.

Insurance is the most expensive hidden cost of car ownership

The national average cost of full coverage car insurance is $2,329 annually or $194 per month as of August 2024, which eats up a considerable portion of a driver’s household budget. Car insurance premiums vary between states due to different state regulations regarding coverage types and tort, traffic density, climate and several other factors. While not all aspects of risk are weighted the same in each state or by each insurance company, there are some notable similarities among the most and least expensive rates for full coverage car insurance.

Most expensive states for car insurance

New York, Louisiana, Florida, Colorado and Nevada are the states with the highest average cost of full coverage car insurance as of August 2024. All these states have at least one densely populated city with a major tourist attraction. High traffic density and vacation congestion increase the risk of car accidents. Colorado, Nevada, New York and Florida have some of the highest rates of vehicle thefts in the country, and New York, Louisiana and Florida have high claim rates associated with extreme weather.

“The rates are ridiculously high here,” says Stacy Lynn, a banking relationship manager in Colorado, who noticed high premiums explicitly associated with comprehensive coverage. “Even though I paid cash for my 2020 Subaru, it still has a high value, so I want full coverage. When I tried to have a $250 comprehensive deductible, the rate shot way up, so I am stuck with a $500 deductible.”

Additionally, New York, Florida and Nevada offer or require personal injury protection (PIP), a type of no-fault medical coverage for the named insured and their passengers. Less than half of the states in the U.S. have PIP coverage, but most of the states that do have higher insurance rates.

Least expensive states for car insurance

Idaho, Vermont, Ohio, Maine and Hawaii have the lowest average rates for full coverage car insurance as of August 2024. Hawaii is unique in that it does not allow age or credit-based insurance scores as car insurance rating factors, which may be why drivers in the Aloha State pay low average premiums.

The four other states do not require drivers to carry PIP, which reduces the amount of coverage drivers must pay for. They also do not experience as many extreme weather events. Unlike many of the more expensive car insurance states, the cheapest states have a plethora of insurance carriers available and lower population density.

Why are car insurance rates on the rise?

Between June 2022 and June 2024, average full coverage car insurance rates skyrocketed by 20 percent, according to rate data from Quadrant Information Services. In a healthy car insurance market, it is common for premiums to fluctuate slightly at each policy renewal. However, this sustained increase in insurance rates was a wake-up call for many drivers about how the hidden costs of car ownership can sometimes be out of their control.

Various influences have contributed to rising auto insurance rates, with sticky car insurance inflation being a significant driver:

• In 2021, car crash fatalities jumped over 10 percent and have just recently started to decline.
• As of June 2024, motor vehicle repair and maintenance remain 34 percent higher than pre-pandemic prices.
• Shortages and supply chain disruptions in the auto mechanic and medical fields have increased the cost of physical damage loss and medical payments related to auto insurance claims.
• National increases in extreme weather loss, vehicle thefts and insurance fraud also contribute to higher insurance rates.

Gas

Our analysis found that when it’s time to fuel up, Americans shell out an average of $3.51 per gallon on regular gas as of late July, totaling $1,837 annually when accounting for average mileage. We considered average regular gas prices from AAA and Federal Highway Administration annual mileage data to see where Americans are actually spending the most on gas based on annual mileage. Nationally, licensed drivers drive an average of 13,596 miles per year, but each state is different, and the most expensive states for gas might not be the ones you would expect.

Where are Americans paying the most for gas?

The following five states average the highest annual cost of gas when accounting for average gas prices and mileage:

• Indiana: $2,913
• Wyoming: $2,765
• Missouri: $2,279
• Georgia: $2,261
• Mississippi: $2,244

The first thing you may notice is that California isn’t in the top five for the highest annual gas cost. At $4.66 per gallon as of late July, California tends to have the highest per-gallon gas price, but with drivers averaging only 11,409 miles per year, it is number 13 in our ranking.

Indiana drivers have the second-highest annual mileage in the nation but pay only $3.68 per gallon of regular gas. People naturally drive more in states where the population is scattered over larger areas. In contrast, drivers living in states with densely populated cities may have shorter commutes and better access to public transportation and ridesharing options.

Maintenance and repairs

Routine car maintenance replaces damaged parts and helps prevent basic wear and tear from becoming a bigger and more expensive problem. The amount of wear and tear your car sustains is greatly impacted by the climate and road conditions where you live and how much you drive each year.

According to 2023 AAA data, the national average cost of vehicle maintenance and repairs is 9.83 cents per mile. By using each state’s regional price parity index (RPP) from the Bureau of Economic Analysis, which shows how much higher or lower the prices of goods and services are relative to the national average, combined with the state’s average annual miles, we can see how much drivers in each state pay for maintenance and repair costs on average. The national RPP is 100, with average maintenance and repair costs totaling $1,336. RPPs over 100 indicate that goods and services cost more than average and vice versa.

Wyoming, Indiana and Mississippi have RPPs well below average, but due to each state’s high average annual miles, they top the list for the most expensive average yearly cost for maintenance and repairs at $1,950, $1,855 and $1,675, respectively. The District of Columbia has the highest RPP in the nation at 112.8 but only averages 6,695 miles driven per year — the least of any state. Drivers in the District of Columbia spend an average of $742 per year on vehicle maintenance and repairs.

New York and Rhode Island also have higher RPPs and lower annual mileage, leading to some of the lowest average maintenance and repair costs at $1,010 and $1,019, respectively.

Taxes

When purchasing a car, potential buyers are usually familiar with their state and county’s tax, title and licensing fees, which can vary greatly. For example, Alaska doesn’t have a state sales tax on vehicles. However, some municipalities have a Motor Vehicle Registration Tax (MVRT), and the tax rate is up to each county. Connecticut has sales tax and property tax on vehicles, with varying mill rates by county, along with many tax exemptions.

Our study did not include titling and licensing fees since drivers are more aware of these costs. Instead, we aggregated statewide sales tax rates and multiplied them by the average value of a used 2022 Toyota Camry, so your actual tax rate will likely differ from our average.

The national average car tax is $1,182 per year. California has the highest average annual tax cost of $1,841. Next is a four-way tie between Georgia, Indiana, Rhode Island and Tennessee, for an average annual car tax of $1,778. Overall, 23 states and the District of Columbia have average annual taxes above $1,400, and 28 have taxes that fall below — with Alaska, Delaware, Montana, New Hampshire and Oregon having 0 percent state sales tax rate.

States with the most expensive hidden car ownership costs

Below are the states with the most expensive hidden costs of car ownership:

Georgia

The Peach State tops our list for the highest hidden cost of car ownership, with drivers paying an average of $8,249 per year, or $687 per month, in hidden costs. Georgia is in the top group for higher average vehicle tax and averages $213 monthly for full coverage car insurance. Despite fairly low per-gallon gas prices, drivers’ average annual mileage of 17,508, plus high annual car maintenance and repair costs ($1,649), pushed Georgia to the front of the class.

This sounds right to Benjamin Cadet, a Georgia resident and inside sales leader with Accenture. “The per-hour labor rate used to be $25 or $30 hours, but now they charge over $100 per hour,” says Cadet. “The roads here in Georgia are horrible, so I spend money on tires, shocks and struts because of the potholes and hills.”

Indiana

Drivers in Indiana pay an average of $8,221 per year for hidden car ownership costs, or $685 per month. Similarly to Georgia, Indiana drivers pay about 7 percent in sales tax, however, Indiana has a drastically lower average rate for car insurance ($1,675 per year). With the second-highest average annual mileage per year (20,560) and slightly above average gas prices, Indiana drivers pay the most annual cost in gas ($2,913) and the second most for car maintenance and repairs ($1,855).

Louisiana

As of August 2024, drivers in Louisiana pay the second-highest rate for full coverage car insurance, with average monthly payments of $304. The Pelican State has slightly lower gas prices than the national average but higher average annual miles (16,612 per year). Louisiana drivers have average hidden cost of car ownership expenses of $8,220 per year or $685 per month.

States with the least expensive hidden car ownership costs

The following states have the lowest hidden car ownership expenses.

New Hampshire

New Hampshire is one of the states without a regular sales tax on vehicles. Aside from a few exceptions, it is the only state without minimum car insurance requirements, but even for drivers who purchase full coverage, rates are low at an average of $1,618 per year. Due to New Hampshire drivers’ lower-than-average annual mileage (11,305 per year), it has lower annual gas ($1,486) and maintenance and repair costs ($1,196), making it the cheapest state for the hidden cost of car ownership at just $4,299 per year or $358 per month.

Washington

One of the first factors that sticks out for Washington is that drivers average only 9,819 miles per year—the third lowest in the country. Even though Washington has a relatively high per-gallon gas price of $4.25, the low annual mileage cuts down on a car’s wear and tear, total spend on gas and the risk of an accident. Vehicle owners in Washington pay $4,427 per year, or $369 per month, in hidden car ownership costs.

Alaska

Drivers in Alaska pay more for full coverage car insurance when compared to Washington and New Hampshire drivers at an average of $2,205 per year. However, similar to New Hampshire, Alaska doesn’t have a statewide sales tax for vehicles. This, combined with low average annual mileage (10,510 miles per year), gives drivers in Alaskan average cost of hidden car ownership of $4,798 per year or $400 per month.

Summary: Hidden car ownership costs by state

According to Greg Brannon, AAA’s Director of Automotive Engineering Research, Americans can love their cars and be financially responsible. “When you lay out the full cost of ownership of your options next to each other, you can see the real cost of buying the ‘cooler’ car beyond just the sticker price,” says Brannon. “Then, you can decide whether the true cost difference is worth it to you, personally.”

• Hidden car ownership costs by state

• Hidden Cost of Car Ownership Methodology

  Bankrate’s Hidden Cost of Car Ownership Study analyzes the average annual expenses of owning and maintaining a gas-powered car nationwide and in every U.S. state, including the District of Columbia. These expenses include auto insurance, vehicle taxes, car maintenance and repair, and gas. Bankrate’s analysis did not include car payments or other debts.

  Bankrate used internal Quadrant data to aggregate average annual full coverage car insurance premiums for all ZIP codes and carriers in all 50 states and the District of Columbia as of August 2024. Bankrate used full coverage car insurance premiums in the study because 80 percent of insured drivers purchase comprehensive coverage in addition to liability insurance, and 76 percent buy collision coverage, according to a Triple-I analysis of 2021 NAIC data. Quoted rates are for the following full coverage limits:

  • $100,000 bodily injury liability per person
  • $300,000 bodily injury liability per accident
  • $50,000 property damage liability per accident
  • $100,000 uninsured motorist bodily injury per person
  • $300,000 uninsured motorist bodily injury per accident
  • $500 collision deductible
  • $500 comprehensive deductible

  Premiums are weighted based on the population density in each geographic region for a single, 40-year-old male and female driver with a clean driving record and good credit. Our base profile drivers own a 2022 Toyota Camry, commute five days a week and drive 12,000 miles annually. These are sample rates and should only be used for comparative purposes.

  To determine the average cost of car maintenance and repairs in every state and the District of Columbia, Bankrate multiplied the national average cost of car maintenance and repairs by the state’s 2022 regional price parity index (RPP). The national average cost of car maintenance and repairs is 9.83 cents per mile, according to AAA’s 2023 Your Driving Costs Study. RPPs from the Bureau of Economic Analysis are indexes that show how much higher or lower effective prices are in the state and the District of Columbia relative to the nation overall. A higher RPP in a state means higher prices of goods and services, and a lower RPP means lower prices.

  According to AAA, average car maintenance and repair costs include retail parts and labor for routine maintenance specified by the vehicle manufacturer, a comprehensive extended warranty, repairs to wear-and-tear items that require service during five years of operation and one set of replacement tires.

  Once we determined the cost of car maintenance and repairs per mile for every state and the District of Columbia using RPPs, we multiplied those figures by the average miles driven per year to determine the annual average cost of car maintenance and repairs. Bankrate used 2022 data from the Federal Highway Administration to find out which state’s residents do the most driving. We determined that by looking at vehicle miles traveled per licensed driver, the sum of annual miles traveled by vehicles divided by the state’s total number of licensed drivers.

  Average annual gas costs for every state and the District of Columbia were estimated using AAA data on average regular gas prices as of July 24, 2024. AAA’s average gas prices are updated daily. We multiplied average national and statewide regular gas prices by the average miles driven per year to determine the average annual cost of gas. In our gas calculations, we used a 2022 Toyota Camry, one of the most popular sedans in the U.S., to establish the average miles driven per gallon.

  Bankrate scanned dozens of DMV and government websites to aggregate statewide auto tax rates. Auto tax rates can vary significantly by state and some states have different tax rates based on the type of vehicle you purchase or the county where you purchased your car. Some states charge sales and/or use taxes for cars on an annual basis, while some states apply a one-time sales and/or use tax when the vehicle is purchased or registered and some states don’t collect taxes on cars at all. You may be subject to a different tax rate than what Bankrate used to calculate average vehicle taxes for every state and the District of Columbia. We multiplied statewide auto tax rates by the average value of a 2022 Toyota Camry to estimate average vehicle taxes for every state and the District of Columbia. The value of a used 2022 Toyota Camry is based on the Kelley Blue Book Fair Purchase Price as of July 24, 2024. The Kelley Blue Book Fair Purchase Price for any individual used vehicle can vary significantly according to mileage, condition, location and other factors. The Kelley Blue Book Fair Purchase Price reflects what buyers currently pay for a 2022 Toyota Camry in typical condition when purchasing from a dealership and is updated weekly.

  This study provides national and statewide estimates for the average cost of owning and maintaining a gas-powered car and should only be used for comparative purposes. Actual driving costs will vary based on the car’s model and year, location, driving habits, operating conditions and other factors.