New car prices are higher than ever.
Average sales prices reached $50,080 in September, the first time they exceeded $50,000, according to Kelley Blue Book.
The milestone came as shoppers rushed to buy electric vehicles before a $7,500 federal tax credit expired on Sept. 30, with EVs selling for an average of $58,124, leading to an overall price increase, according to KBB.
New car prices typically rise in the early fall, but September’s year-on-year increase was the largest since spring 2023, due to increases in EV purchases, luxury goods sales and, to a lesser extent, tariffs, KBB said.
“The removal of[EV]incentives could cause electric vehicle sales to decline slightly, with average transaction prices falling below $50,000 later this year,” Brian Moody, editor-in-chief of Kelley Blue Book, told CNBC Make It.
In any case, car prices have been steadily rising since February. And when you factor in costs like insurance, maintenance, and fuel, monthly costs can exceed $1,000.
The actual cost of a car is $50,000 per month.
To illustrate what current prices mean for buyers, consider a $50,080 car financed over 60 months with a 20% discount and an interest rate of 7.12%, according to Bankrate. This is the current national average for a five-year new car loan.
That means your monthly payments will be approximately $796. But when you add in gas and insurance, your actual monthly costs will be even higher.
Americans spend an average of $177 a month on fuel, according to Empower’s analysis, and the national average cost of auto insurance with liability, collision, and comprehensive protection is $242, according to Experian. This brings the total monthly cost to new car owners to about $1,215.
You should also consider annual and ongoing costs, such as:
Maintenance and repairs: According to ConsumerAffairs, the average annual fee for all vehicles in the U.S. is about $900 Registration fees: According to Insurify, registration fees are about $75 per year, although they vary widely by state
Consider a used or leased car to offset costs
It’s worth remembering that new cars can lose around 20% of their value in the first year and up to 60% after five years, according to Kelley Blue Book.
For cost-conscious buyers, it may be worth considering used and lease options, which typically have lower monthly payments.
“As everything becomes more expensive, more and more people are turning to leasing as a way to lower the cost of ownership,” says Xander Cook, co-founder of lease-buying platform Lease End.
Leasing essentially means renting a new car for a set period of time rather than buying it outright. Monthly payments tend to be lower, but leases have mileage limits (typically 10,000 to 15,000 miles per year) and may include excess wear and mileage charges. Additionally, a lease does not give rise to ownership at the end of the term.
“Leasing doesn’t work for everyone. It’s probably not the best fit for people who drive many miles a year or live in a really rural area,” Cook says. “But for most people, especially those who live in cities or suburbs and drive 10,000 to 12,000 miles a year, leasing makes a lot of sense.”
Another option is to buy a used car. The trade-off here is that maintenance and repair costs can increase as the vehicle ages and the warranty period ends.
But cars built about three years ago often hit the sweet spot between price and reliability, according to JD Power. By then, most models have absorbed steep depreciation but are still under warranty.
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