The price of cars is driving some people crazy. But it’s not just the high price of new cars that have consumers pumping the brakes, it’s used cars ones too.
Up, Up, and Away
The price of new cars has been accelerating for years, but the pandemic accelerated the trend. Since April of 2021, “average transaction prices” have climbed 21% from $40,000 to $48,510, according to Kelly Blue Book (KBB). The online car guide cited inventory, manufacturer incentives, dealer discounts, and trade-in vehicle value as reasons for high prices.
Disappearance of entry-level cars in favor of trucks and SUVs has also driven up the price of cars. “In the past, automakers had to meet average fuel-economy standards set by the National Highway Traffic Safety Administration for their entire fleet,” according to Consumer Reports. Automakers would reach that standard by offering low-cost, fuel-efficient vehicles to offset the fuel-inefficiency of larger cars. However, in 2008, Consumer Reports noted, “fuel-economy regulations were changed to focus on “footprint”—how well a model performs for its size—rather than the average for all the vehicles a company sells,” thus incentivizing automakers to focus on larger cars like trucks and SUVs.
Used Cars
The high prices of cars and “longer vehicle lifespans” has led some consumers to keep their cars for longer, reported the Wall Street Journal. Tom Piippo, owner of Tri-County Motors in Rudyard, MI told the Journal he regularly sees cars with over 200,000 miles on them, something unusual in the 1990s.
The Journal also reported that consumers hold on to older cars because “newer models have become more expensive to repair.” Added technology like computers and screens can drive up prices.
Certain cars fare better than others. “Electric vehicles had some of the highest rates of problems reported in the study, in part because of their batteries and that they tend to come with more technology built in,” the Journal reported.
Car Insurance Prices
While purchasing a car is expensive for many, so is owning one. Like car prices, insurance premiums have been climbing for more than a decade. According to MarketWatch, the online financial company owned by News Corp, the average car insurance premium jumped almost 19% between 2022-2023. MarketWatch cites interest rates, increased repair costs, supply chain issues, and health care costs as some of the reasons insurance has become more expensive.
To keep costs down, the site recommends comparing quotes, seeking discounts, and bundling car with home or auto.
