Buying your first car is exciting—but the costs don’t stop once you drive off the lot. From monthly payments to fuel, insurance, and surprise repairs, owning a car in 2025 comes with more financial layers than many first-time buyers realize. If you’re a young adult or budget-conscious shopper looking to make a smart, informed purchase, understanding the true cost of car ownership is essential.
Here’s a breakdown of what to expect—and what to plan for—before you commit to the keys.
1. Loan Payments or Purchase Price
If you’re financing a vehicle, your monthly payment is likely the most noticeable cost. In 2025, the average new car loan is around $730/month, while used vehicles average closer to $500/month, depending on your credit score, loan term, and down payment. A larger down payment or opting for a used, fuel-efficient model can lower that number significantly.
If you’re paying in cash, you’ll skip the interest but still need to budget for all the other ongoing costs. Either way, make sure your car payment doesn’t eat up more than 10–15% of your monthly income.
What to budget: $5,000–$9,000/year depending on car type and financing
2. Insurance
Auto insurance is required in nearly every state and can vary widely based on your age, location, driving history, and even credit score. For young drivers, premiums can be steep—especially for newer vehicles or models with high repair costs. In 2025, the average annual premium for drivers under 25 is around $2,500, though safe driving apps, good student discounts, and bundled policies (with renters or health insurance) can help bring that down.
Shopping around and getting quotes from multiple providers is essential—and can sometimes save you hundreds a year.
What to budget: $1,500–$2,500/year for younger drivers
3. Registration and Fees
Every vehicle must be registered with your state’s DMV, and the fees can vary based on location, vehicle value, and type. Some states charge a flat rate, while others calculate registration based on your car’s age, weight, or value. You may also face title transfer fees, emissions testing, or local taxes.
For example, registering a new car in California could cost $400 or more, while it might be closer to $100 in states with flat-rate systems.
What to budget: $100–$500/year depending on your state
4. Fuel or Charging Costs
Gas prices are always in flux, but in 2025, the national average hovers around $3.70 per gallon. Driving 12,000 miles annually in a car that gets 30 MPG would cost about $1,480 a year in fuel. If you’re driving a hybrid or EV, your fuel costs will be lower—but not free.
Electric vehicles cost an average of $0.04 to $0.05 per mile to charge at home, so 12,000 miles could cost around $500–$600 annually. Public charging can be more expensive, especially with fast chargers.
What to budget:
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Gas: $1,200–$2,000/year
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Hybrid: $800–$1,200/year
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EV: $500–$900/year
5. Maintenance and Repairs
Oil changes, tire rotations, brake pads, and unexpected repairs add up—especially if your car is out of warranty. Newer vehicles often require less maintenance in the first few years, but older or used models can demand more attention (and more money). Even basic maintenance can run $500–$800/year, and repairs like new tires, batteries, or engine work can cost hundreds more.
To stay ahead of surprise costs, set aside a maintenance fund and follow the maintenance schedule in your car’s manual.
What to budget: $500–$1,200/year depending on vehicle age and mileage
6. Depreciation
Depreciation—the loss of your car’s value over time—is one of the biggest hidden costs of ownership. Most new cars lose 15–20% of their value in the first year, and up to 60% after five years. That means your $30,000 car might be worth just $12,000–$15,000 by the time it’s paid off.
Buying used can help avoid the steepest depreciation curve, while choosing a model with strong resale value (like a Toyota, Honda, or Subaru) can help you retain more of your investment.
What to budget (or expect to lose): $2,000–$4,000/year in value
What It All Adds Up To
For a first-time buyer, the true cost of owning a car in 2025 can range from $7,500 to over $12,000 per year, depending on the type of vehicle, how you drive, and where you live. Here’s a quick recap of what to budget annually:
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Loan or financing: $5,000–$9,000
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Insurance: $1,500–$2,500
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Registration/fees: $100–$500
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Fuel/charging: $500–$2,000
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Maintenance/repairs: $500–$1,200
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Depreciation: $2,000–$4,000 (non-cash loss, but worth noting)
Total Estimated Annual Cost: $7,500–$12,000+
Drive Smart, Budget Smarter
Before you sign on the dotted line, take time to calculate the full picture—not just the price tag on the windshield. A smart budget, some careful shopping, and an understanding of these ongoing costs will help you choose a vehicle that fits your lifestyle without straining your finances. Whether you’re saving for your first ride or choosing between new and used, planning ahead is the key to driving confidently—and affordably—in 2025.