John Townsend
Public Relations Manager, DC
O: (202) 481-6820 (ext. 4462108)
C: (202) 253-2171
jtownsend@aaamidatlantic.com
WASHINGTON, D. C. (Thursday, September 13, 2018) ––By far, the largest expense associated with purchasing a new car is something many drivers fail to consider – depreciation, according to the AAA’s 2018 Your Driving Costs study. In fact, it accounts for almost 40 percent of the cost of owning a new vehicle – more than $3,000 per year – and is influenced by a number of factors, including shifting consumer preferences. AAA urges car buyers to think about both market trends and length of ownership when shopping for their next vehicle.
“New vehicles offer the latest designs, cutting-edge technologies and warranties that offer peace of mind,” said John Nielsen, AAA’s managing director of Automotive Engineering and Repair. “But, car owners that like to change vehicles frequently should be thinking about the resale value – not just the purchase price – when choosing their next ride.”
Vehicle ownership is increasing across the Washington metro area, as it is across America. So too is the number of new vehicles registered across the region, which now tops “4.1 million vehicles, up from 3.89 vehicles in 2014,” according to the latest vehicle census from the Transportation Planning Board (TPB).
“Depreciation costs on sedans increased up to 13 percent over last year. It is inexorable,” said John B. Townsend II, AAA Mid-Atlantic’s Manager of Public and Government Affairs. “It is not an urban legend. The second you drive a new car off the lot it will lose as much as 11 percent of its value through the unstoppable force of depreciation. Depending upon the vehicle, it can lose up to 30 percent of its value in the first year. ‘On average, a new car will lose 60 percent of its total value over its first five years,’ research shows.”
AAA’s annual analysis found demand for sedans has slipped as American appetite shifts to small SUVs and pickup trucks. In contrast, the TPB analysis reveals that “light-duty trucks, including Sport Utility Vehicles (SUVs), on our region’s roads have increased in number and in share.” Electric and hybrid vehicles, however, also have seen a gain in popularity with 20 percent of Americans saying they will likely go electric for their next vehicle purchase, up from 15 percent the previous year.”
This year, electric and hybrid vehicles also saw a dip in depreciation value and offer many cost benefits such as reduced finance charges and lower repair and maintenance bills, making “going green” a more affordable choice than in years past. Across the metro area, “while there are more hybrid vehicles out on the roads, there has been a relative decline in hybrid vehicle purchases in recent years,” the TPB explains.
Buyers often only give priority to purchase price and monthly payment when choosing a new vehicle, sometimes selecting one based on the best deal available. The length of car ownership, however, is of equal importance. Consumers who plan to keep a vehicle for only a few years should be cautious of deep discounts and incentives offered by automakers and dealers. These are often designed to sell less popular models and directly influence depreciation. Low down payments and extended finance terms can also have a similar effect. Stretching a car loan over five, six or even seven years may be an effective way to lower payments, but owners may quickly find themselves owing more than a vehicle is worth.
Leasing is similarly affected since payments are based in part on the projected residual value of the car at the end of the lease, serving as a good indicator of which models experience higher or lower depreciation. Since resale value is not a factor at the end of a lease period, buyers who prefer less popular models or only want a vehicle for a short time, may consider leasing a more viable option. “The secret to minimizing deprecation costs?” continued Nielsen. “Keep your car for a long time and keep it well-maintained or even consider buying a quality, pre-owned vehicle.”
AAA’s Your Driving Costs found the average cost to own and operate a new vehicle in 2018 is $8,849 per year. The figure is calculated based on the cost of fuel, maintenance, repairs, insurance, license/registration/taxes, depreciation and loan interest. The study examined 45 2018 model-year vehicles across the following nine categories.
Vehicle Type |
Annual Cost* |
|
Vehicle Type |
Annual Cost* |
Small Sedan |
$6,777 |
|
Minivan |
$9,677 |
Hybrid |
$7,485 |
|
Medium SUV |
$9,697 |
Small SUV |
$7,869 |
|
Large Sedan |
$9,804 |
Electric Vehicle |
$8,384 |
|
Pickup Truck |
$10,215 |
Medium Sedan |
$8,866 |
|
Average |
$8,849 |
*Based on 15,000 miles driven annually
Motor vehicle registrations in the national capital area grew from 3.89 million vehicles in 2014 to about 4.1 million by 2016, a net gain of 210,000 vehicles, in the District and 10 surrounding jurisdictions in Maryland and Virginia, notes the TPB. While the latest technology, style and options make them attractive to car buyers, a new car may not be the most economical choice for some buyers. Vehicle owners looking for alternatives to new car ownership or ways to minimize their operating costs should consider the following:
· Buy (gently) used – By driving a pre-owned vehicle in good condition, ownership costs are significantly lower. A safe, reliable vehicle can be found at an attractive price point.
· Fuel responsibly – Avoid wasting money on premium grade gasoline unless your vehicle specifically requires it and, if you’re one of the 20 percent of Americans considering an electric car, these vehicles offer lower fuel and maintenance costs.
· Show your car some love – It sounds counterintuitive, but spending money on routine maintenance can actually save you money in the end. To keep engines running cleaner and longer, consider switching to synthetic oil and upgrading to a higher quality fuel TOP TIER™ gasoline.
· Slow down – When gas prices are high, small changes in the way you drive can make a big difference.
AAA’s Your Driving Costs study employs a proprietary methodology to analyze the costs of owning and operating a new vehicle in the United States, using data from a variety of sources, including Vincentric LLC. Additional information and detailed driving costs, including insurance costs, finances charges, registration/license fees, taxes and finance charges can be found at NewsRoom.AAA.com or AAA.com/YourDrivingCosts.
Follow us on Twitter: @AAADCNews
Like us on Facebook: AAA Mid-Atlantic News
Washington, D.C. Mailing Address:
1405 G Street NW
Washington, DC 20005
AAA provides automotive, travel and insurance services to 57 million members nationwide and nearly 78,000 members in the District of Columbia. AAA advocates for the safety and mobility of its members and has been committed to outstanding road service for more than 100 years. The not-for-profit, fully tax-paying member organization works on behalf of motorists, who can now map a route, find local gas prices, discover discounts, book a hotel and track their roadside assistance service with the AAA Mobile app for iPhone, iPad and Android. For more information, visit https://aaa.com
Ragina C. Ali
Public Relations Manager, MD
O: (410) 616-1900 (ext. 4361152)
C: (443) 465-5020
RAli@aaamidatlantic.com