The purchase price of a car is just the beginning, there are a number of expenses that hit your pocketbook after you drive off the lot and most of them are annual expenses. These costs include items such as car insurance, sales tax, gas, registration, and repair costs. All of this added up is referred to as the "total cost of ownership," and it can vary dramatically between among vehicles, and the state that you call home.
We wanted to see just how much costs vary by state and the results were pretty astounding. Over five years, the most expensive state for total cost of ownership came in at $16,357 more than the cheapest state, which breaks down to $3,271 a year. Putting over $3,000 a year back in your pocket can be a huge bonus.
How to calculate your total cost of ownership
In order to calculate the five-year cost of owning a vehicle we collected car ownership-related numbers from multiple sources, as well as using our own data on average auto insurance costs. Our research included:
- Sales tax
- Registration costs
- Gas prices
- Average miles per gallon
- Average number of miles driven by state
- Repair costs
- Extra repair costs associated with road conditions
When we ran the numbers, Wyoming came out on top when it comes to expensive states to operate a car while New Hampshire grabbed the brass ring for lowest cost of ownership. The rest of the states shook out as follows.
States that cost the most and least for car ownership
The top 10 most expensive car ownership states over a five-year period:
- Wyoming -- $36,106
- California -- $30,987
- Louisiana -- $30,793
- Michigan -- $30,556
- Oklahoma -- $30,433
- Arkansas -- $28,448
- Georgia -- $27,718
- Texas -- $27,562
- New Mexico -- $27,347
- North Dakota -- $27,021
The 10 cheapest states to own a car over a five-year period:
- New Hampshire -- $19,749
- Wisconsin -- $21,074
- Massachusetts -- $21,196
- Ohio -- $21,384
- Vermont -- $21,737
- Maine -- $21,994
- Oregon -- $21,997
- Hawaii -- $22,623
- Alabama -- $22,750
- Alaska -- $22,766
New Hampshire doesn't have sales tax which saved a bundle and they also enjoy very low insurance rates. According to our data, the Granite State has the sixth lowest insurance rates in the country. Wyoming, on the other hand, suffered because of fairly high insurance rates (13th highest in the country), a hefty sales tax, expensive gas and a higher percentage of cars with poor gas mileage.
Multiple factors go into the cost of owning a car and we found that the different metrics vary widely. One state may have expensive car insurance rates. The same state might have no sales tax. One state may have high gas prices, while at the same time a higher percentage of cars with excellent gas mileage.
Curious where you state falls in our rankings? Here's the complete list of states:
|State||Total including all costs over five years|
State sales tax and car ownership
The majority of states charge sales tax and this has a definite impact on the cost of ownership. Tax rates range from a shocking 9.46 percent in Tennessee down to 1.76 percent in Alaska. Currently, there are four states that don't have a sales tax and two of those states are in the top 10 lowest cost of ownership states.
While sales tax absolutely impacts a state's ranking, it doesn't automatically translate into a low cost of ownership, Delaware and Montana don't have sales tax, but those states didn't finish in the top 10 cheapest states.
Here is the sales tax rate by state and how much that tax costs for a $25,000 vehicle:
Sales tax rate by state
|State||Sales tax rate||Sales tax on $25K car|
*Source: The Tax Foundation
Auto insurance costs
Auto insurance premiums are a huge factor in the cost of owning a car and where you live has a major impact on that cost. In some states you may pay double what someone in another state pays for coverage. As an example, Michigan residents pay the highest rates in the country with the average car insurance premium running $2,611 while drivers in Maine are only paying $845. This is a difference of $1,766 every year.
Michigan's high insurance costs help push it into the top five states for the most expensive total cost of ownership. Louisiana and Oklahoma also made it into the top five, thanks to high insurance costs.
There are a number of reasons that car insurance costs vary so dramatically between states. Michigan for decades (new car insurance reform laws are in place to go into effect next year) had a very expensive, very unique no-fault car insurance system. It required all drivers to carry Personal Injury Protection (PIP) coverage that guarantees unlimited, lifetime medical benefits to auto accident victims. This dramatically increases an insurer's risk, as well as premiums.
There are other reasons that insurance rates are high or low. Insurers consider a number of factors when setting a premium including the type of car you are driving, your neighborhood, crime rates and even weather patterns. Here are four major factors that influence car insurance rates in your state:
- State government-mandated coverage: Alaska's mandatory minimum liability coverage levels are twice Alabama's, for instance. Higher auto liability limits result in higher premiums.
- Crime rates: If your state has lower property crime levels, your comprehensive insurance coverage, which covers stolen vehicles, may be less costly than in high-crime areas.
- Population density: Crowded roads create high accident rates, affecting collision coverage costs. This is why more rural states typically enjoy lower car insurance rates.
- Wildlife and weather: Areas prone to high winds or hail or that have lots of wildlife (deer, for instance) can cause expensive vehicle damage, which is also covered by comprehensive coverage. States located in Tornado Alley and other areas prone to hail damage (think Louisiana and Oklahoma) will always be a bigger risk and more expensive for insurance.
Auto insurance costs by state
Insurance.com commissioned Quadrant Information Services to calculate auto insurance rates from six large carriers (Allstate, Farmers, GEICO, Nationwide, Progressive and State Farm) in 10 ZIP codes per state.
Rates are based on full coverage for a single, 40-year-old male who commutes 12 miles to work each day, with policy limits of 100/300/50 ($100,000 for injury liability for one person, $300,000 for all injuries and $50,000 for property damage in an accident) and a $500 deductible on collision and comprehensive coverage.
Here's the breakdown of car insurance rates by state, ranked from most to least expensive:
|State||Average auto insurance rates||Compared to National Average of $1,457|
Driving and gas costs
The cost of fuel can vary by quite a bit depending on where you call home. According to data collected by the American Automobile Association, California residents were paying the most for gas, averaging $3.69 a gallon. Alaska, Hawaii, Illinois, Nevada, Oregon, and Washington are all over the $3 a gallon mark while everyone else is paying in the $2.00-$3.00 range.
Added up over the course of a year, $1.00 a gallon really adds up, you may pay hundreds if not thousands more for gas. Gas prices are only one factor in your annual cost of gasoline. Your car's gas mileage and how much you drive also play a role.
AAA numbers show that Hawaii ranks number one when it comes to mpg, averaging 20.4 with New York and Delaware rounding out the top three. On the low end of the mpg pole are Alaska (13.60) and Wyoming (our most expensive total cost of ownership state) with an average of 13.7 mpg. Low mpg and expensive gasoline push up your total cost of ownership.
How many miles you drive every year will also impact your total cost of ownership. Wyoming residents top this list, cruising roughly 21,821 miles a year which is over double the miles driven in Alaska where they only hit 9,915 miles a year.
States with cheaper gas, but with cars with lousy gas mileage and whose drivers travel longer distances may still pay more at the pump over a year.
Here is each state's average regular gas prices, average miles per gallon and average number of miles driven annually:
Driving and gas costs by state
|State||MPG||Miles||Avg price per gallon||Annual cost|
Sources: Federal Highway Administration; American Autombile Association
Cars need to be repaired from time to time and while repair costs do vary by state the range is not as wide as other metrics, such as insurance and sales tax. The range varies from the low $300s to the upper $300s so most drivers are paying roughly the same regardless of where they live.
In using this data, we surmised that drivers in each state may need one repair job each year and added that amount to the annual cost of owning a car.
Here is the average repair cost by state:
Repair costs by state
|State||Average Repair Cost|
Added repair costs connected to road conditions
Poor road conditions can factor into the total cost of ownership as they result in lower mpg and more vehicle repairs. The Department of Transportation did a study that estimated the effect poor road conditions have on drivers' wallets. According to their data, New Jersey drivers pay an extra $601 for road condition-related repairs. California drivers fork over an average of $586 to repair cars damaged by road conditions.
On the other extreme, Georgia drivers only pay an average of $60 per year. This clearly highlights that car ownership costs are often beyond your control.
Here are the added repair costs connected to road conditions by state:
|State||Annual extra costs|
Source: Department of Transportation
How to save on total cost of ownership for a car
We've shown you how much each average driver pays for owning a car. The good news is that you can control some of those costs.
Sure, you can't avoid taxes, higher gas prices and registration expenses, but there are ways to reduce some of the costs of owning a car.
Here are some ideas:
Shop around for auto insurance
Insurers base rates on risk. That can include where you live, what you drive, how much you drive, who's driving your car, your driving record and even your credit history.
Insurance companies don't base risks the same. One insurer may consider you risky. Another may give you amazing rates.
So, it's critical to shop around for car insurance. Get quotes for the same coverage from multiple insurers and see how much you can save.
Check out Insurance.com'scar insurance coverage calculator to see how changing coverage, raising or lowering deductibles and adding services affects your costs.
Raise your deductible
One easy way to reduce the cost of car insurance is by increasing your deductible.
The deductible is what you pay for repairs when you file a claim. So, if you have a $500 deductible and your car suffers $2,000 worth of damage, you'll pay the $500, while the insurer picks up the rest.
The higher the deductible, the lower the premiums. If you raise your premium, you'll be less apt to file a claim and you'll need to pay more if you do.
If you raise your deductible, make sure you have money set aside to pay the deductible if you need to file a claim.
Take advantage of discounts
Insurers offer auto insurance discounts. You can save by bundling policies, showing loyalty, being a new customer, not getting into accidents or having a child who's a great student.
Those discounts differ by car insurance company. Make sure to ask each insurer how much you would save from the various discounts that it offers.
Buy a car with better gas mileage
There's nothing you can do about paying higher gas prices. However, you can make sure you own a vehicle with the best gas mileage possible.
As our research shows, your car's gas mileage can play an even more important role than what you pay at the pump. Switching to a vehicle that gets you another 10 or 20 miles per gallon can save you thousands annually. Every bit helps if your state's average gas price is closing in on $4 a gallon.
The state in which you live has a profound effect on the cost of vehicle ownership. While some higher costs are often unavoidable, such as sales tax and registration, you do have control over others, including the number of miles you drive and the fuel-efficiency of the car you choose.
Because auto insurance represents one of the greatest costs of car ownership, compare car insurance quotes to obtain the lowest price auto insurance.