Car Costs Soar: High Prices, Higher Rates
Photo credit: Bridge Michigan
The aftermath of COVID and semiconductor shortages has catapulted U.S. car ownership costs.
Average new car prices hit $48,759 in December, surging 30% since January 2019. Monthly payments, now at a staggering $770, doubled from pre-pandemic levels. Used car bills rose to $561 from $410 in 2019.
The total cost of owning a new car in 2023 reached $12,182 or $1,015 monthly, up 14% from 2022.
Despite high prices, new vehicle sales spiked 13% in December, reaching 1.4 million. Rising loan interest rates, averaging 9.6% for new cars and 14.3% for used ones, contributed to affordability challenges. Subprime borrowers facing loan delinquencies hit a record 6.11% in September.
Slow replenishment of car inventories and inflated prices persist, with a $10,000 increase since 2019. Used car prices, although slightly down from the peak, still face headwinds.
Electric vehicles encounter resistance due to high prices, averaging almost $51,000, hindering adoption. Relief may be on the horizon as new-car inventory returns to normal levels in 2024, potentially easing the seller's market.
The Federal Reserve's expected interest rate reduction in 2024 offers hope for improved car affordability.
