Report: Vehicle expenses straining U.S. drivers’ budgets
A new report from NerdWallet delves into the worries Americans have about the increasing cost of owning an automobile.
Around a quarter of vehicle owners in the United States say expenses related to their vehicle make up a significant portion of their monthly budget, according to NerdWallet’s 2023 Auto Buying and Insurance Report. The report showed the average monthly cost of vehicle ownership (including payments, upkeep, gas and insurance) is $556, which amounts to 12% of the average monthly household income of $4,537.
Younger consumers are seeing the highest auto expenses, with average vehicle costs coming in at $921 a month for those in Gen Z and $821 a month for Millennials. Meanwhile, Baby Boomers average $308 per month in car expenses and GenXers average $433. NerdWallet’s survey also found 20% of Gen Z and 18% of Millennial vehicle owners – compared to 6% of Gen Xers and 3% of Baby Boomers – spend over $1,000 each month to keep things rolling.
Between inflation and global instability, gas prices have become heavy contributors to increasing vehicle costs. The AAA reports the national average for regular gas in the U.S. as of March 13, 2023 was $3.473 per gallon. While this is down from the average of $4.325 per gallon of regular gasoline recorded a year prior, this is still a significant increase from pre-pandemic levels – with the U.S. Energy Information Administration (EIA) reporting gas averaged $2.60 per gallon in 2019.
Even with rising fuel costs, traditionally fueled vehicles remain the top choice for consumers, with 70% of those surveyed reporting they plan to purchase or lease a gas or diesel-powered vehicle in the future, while 37% said they plan to buy or lease a hybrid vehicle and 31% said they plan to buy an electric vehicle (EV).
According to the survey, 41% of Americans believe the minimum liability coverage required by their state is sufficient. The price difference between state minimum liability and “full coverage” (including liability, uninsured motorist, comprehensive and collision coverages) is significant enough to tempt some drivers looking to save money to switch to the legal minimum, which averages $57 a month, from “full coverage,” which averages $179 per month. However, dropping coverages could leave drivers exposed to an exceptional amount of risk with no coverage for damage done to their own vehicle, which could leave them financially worse off in long run if an accident occurs.
The good news in NerdWallet’s report for providers working to hold onto auto policies is that the majority of car owners (57%) are satisfied with their current insurance provider, and only 26% report shopping for auto insurance at least once a year. Despite the low number of frequent shoppers, 63% of those surveyed said they believe it is true you can save money by switching auto insurance carriers.