Key Takeaways
Why Car Cost Myths Are So Persistent
Drivers form beliefs about vehicle costs early — often from a single purchase experience, a tip from a friend, or advice that was accurate decades ago but hasn't kept pace with today's market. These myths are stubborn because they feel intuitive, and because the true cost of owning a car is spread across so many line items that no single purchase makes the full picture obvious.
Understanding where the real money goes is essential for anyone trying to budget honestly. Our guide to the full price of owning a car in America breaks down every expense category drivers face — but before diving into the numbers, it helps to clear away the misconceptions that skew most people's expectations.
Myth
Newer cars are always cheaper to insure because they have better safety features.
Fact
Newer vehicles often cost more to insure because their repair costs — especially for advanced sensors and cameras — are significantly higher.
Modern driver-assistance systems like lane-keeping cameras, adaptive cruise radar, and automatic emergency braking are expensive to replace after even a minor collision. Insurers price premiums partly based on expected claim payouts, so a car that costs $3,000 to repair a bumper (because the bumper houses sensors) will carry higher collision and comprehensive premiums than an older model with a simpler repair profile. Safety ratings help — but they don't override repair cost calculations.
Myth
Buying used always saves money compared to buying new.
Fact
Used cars can reduce the purchase price but may offset savings through higher interest rates, shorter warranty coverage, and unpredictable repair costs.
Lenders often charge higher interest rates on used vehicle loans than on new ones, which can meaningfully narrow the price gap over a standard loan term. A used vehicle with no remaining factory warranty also exposes the buyer to full repair costs immediately. Depending on the vehicle's history, mileage, and condition, maintenance bills in the first year can erase the sticker-price savings. A certified pre-owned vehicle with an extended warranty can mitigate this — but adds back cost. The math is never automatic.
Myth
Fuel is the biggest ongoing cost of owning a car.
Fact
Depreciation is typically the single largest cost of vehicle ownership, particularly in the first five years.
Fuel costs are visible at every fill-up, which makes them feel dominant — but depreciation operates silently in the background. A new vehicle can lose 15–25% of its value in the first year alone, and 40–50% or more over five years. That paper loss becomes a real financial consequence when the car is sold or traded in. By contrast, fuel costs — while significant — are more predictable and partially controllable through driving habits. Fixating on MPG while ignoring depreciation leads many buyers toward poor value decisions.
Myth
Electric vehicles are cheaper to own overall because you skip the gas station.
Fact
EVs typically have lower fuel and routine maintenance costs, but higher purchase prices and often higher insurance premiums offset those savings for many drivers.
The fuel and maintenance savings from an EV are real: no oil changes, fewer brake replacements due to regenerative braking, and lower per-mile energy costs in most US regions. However, EVs carry higher average transaction prices, and their battery repair and replacement costs — combined with expensive sensor-laden body panels — push insurance premiums above comparable internal combustion vehicles in many cases. How quickly an EV breaks even financially depends heavily on annual mileage, local electricity rates, available tax incentives, and how long the owner keeps the vehicle.
Myth
Keeping a car for a long time always costs less than buying a new one every few years.
Fact
Long-term ownership can be economical, but only if maintenance is kept current — deferred upkeep can make an aging vehicle surprisingly expensive.
The logic is sound in principle: once a car is paid off, eliminating the monthly payment reduces fixed costs substantially. But aging vehicles require more frequent and often costlier repairs — timing belts, transmissions, suspension components — and owners who deferred routine maintenance accelerate those costs. A single major repair on a high-mileage vehicle can rival several months of payments on a newer car. Long-term ownership pays off most reliably when the driver has kept up with the manufacturer's maintenance schedule throughout.
The Costs Drivers Consistently Underestimate
Even drivers who know the myths still tend to mentally anchor on the monthly payment or the pump price, overlooking the expenses that accumulate quietly. Depreciation alone accounts for roughly 40–50% of total ownership cost in the first five years of a new vehicle's life, according to long-standing industry analysis — yet it rarely appears in a buyer's mental budget.
~$12,000
Average annual cost to own and operate a new vehicle
AAA's annual "Your Driving Costs" study has consistently placed average new vehicle ownership costs in this range when including depreciation, insurance, fuel, and maintenance.
40–50%
Value lost to depreciation in first five years
Industry analyses of new vehicle residual values consistently show this depreciation range, making it the largest single cost of ownership for most buyers.
3–4¢
Average per-mile maintenance cost advantage for EVs
U.S. Department of Energy studies have estimated EV maintenance costs are meaningfully lower per mile than comparable internal combustion vehicles.
Registration fees, dealer add-ons, and unexpected repair bills add up faster than most buyers anticipate. See our breakdown of hidden vehicle costs that catch new owners off guard for a closer look at what tends to blindside first-time buyers.
Vehicle type also plays an enormous role. Sedans, SUVs, trucks, and EVs carry meaningfully different annual cost profiles across insurance, fuel, and maintenance — a comparison covered in detail in our article on annual car ownership costs by vehicle type.
Depreciation Is the Cost Most Buyers Ignore
Because depreciation doesn't show up on a monthly statement, it's easy to treat it as a non-expense — but it's not. When you sell or trade in your vehicle, the accumulated loss in value becomes a very real out-of-pocket cost. Buyers who focus exclusively on payment amounts and fuel economy while ignoring depreciation often make vehicle choices that cost far more over a five-year window than they expected.
For drivers trying to reduce what they spend, consistent upkeep is one of the highest-return habits. Explore smart habits that reduce long-term car ownership costs for practical strategies that compound over time. And if you're weighing whether to hold your current vehicle or trade up, keeping a car long-term vs. trading it in every few years offers a balanced financial comparison of both paths.
This article is for general informational purposes only. Insurance premiums, financing rates, and vehicle costs vary significantly by location, provider, and individual circumstances. Consult a licensed financial or insurance professional before making major vehicle purchasing or financing decisions.