Buying a new car comes with a significant amount of maintenance costs as well as insurance. However, something that might not come as the first thought would be its depreciation. Imagine two cars parked in a dealership lot: a brand new car, and a 3-year-old car of the same company, same model, same series. If we consider 5 years ahead, the costs for both might come to around $51,253. The New versus Used Car Affordability Gap 2026 analysis established this, because the older one has already been subjected to depreciation, while the new one is yet to face it. Depreciation hits the steepest after owning a new vehicle, and buyers largely skip this.
What it costs to own a new car in 2026
Owning a car comes with several costs: insurance, maintenance, depreciation, and financing and budgeting. According to AAA Your Driving Costs 2026, the average cost to operate and own a new vehicle is 86 cents per mile at 15,000 miles per year. This would make the annual average about $12,863.
Even the cheapest new cars add up
We might think owning a cheap car would result in less of a cost. However, AAA suggests that small or economy sedans, often the lowest cost category, also average around $9,260 per year. Compared to our previous figures, it’s not too cheap.
Depreciation: the biggest cost you never pay at the pump
Depreciation would be the single biggest cost for owners of new vehicles, averaging around $4,422 annually according to AAA. It always hits the hardest in the first few years, because a brand new asset undergoes an immediate shift from a premium product to a used commodity.
Why a 3-year-old car skips the steepest drop
After its first 3 years, the car has been through its steepest depreciation. Further depreciation in upcoming years gets reduced significantly. So the next owner will not face as much depreciation loss as the first owner.
Financing and insurance: the new car premium
The more expensive a car is, the higher its insurance and loans will cost. If you buy on a bank loan, the bank decides on the insurance. They will want you to cover comprehensive and collision coverage, and the loss payee would be your bank. So the company pays your bank first, then whatever is left is yours. If depreciation has hit your car at a significant cost, there will be a gap between what insurance pays you at market value and what you owe the bank. Gap insurance covers that.
Case study: new versus used BMW 3 Series
The more expensive the car is, the higher its damage repair and maintenance costs are. In the New versus Used Car Affordability Gap 2026 analysis, a 3-year-old BMW 3 Series showed a lower 5-year total cost of ownership than the same model newly purchased. The gap was more than $5,000, with the new car costing $56,601 and the used one $51,253.
When buying new still makes sense
New cars are best if you can cover warranty coverage, newer safety tech, incentives, and low rate financing, especially when you want to keep this car for 10 years or more. This will allow you to spread out the depreciation. However, if these are not feasible, cheaper cars also provide you around the same costs and same purpose.
How to run your own numbers
To make the right choice with a good budget, compare 5-year total costs, get insurance quotes for both options, check the used car’s history and remaining warranty, factor in annual mileage, and compare interest rate, loan length, and monthly payment. The cheapest costing cars aren’t always the cheapest to own in the long term. Doing your own calculation will let you make better decisions, not based on sticker price, but on actual numbers.
