High Inflation and Gas Prices Make Car Ownership Difficult for Millions
It seems the double whammy of runaway inflation and high gas prices are weighing heavily on millions of Americans.
Yes, as many motorists already know, new vehicles cost more than 12% more than a year ago, and it’s even worse for used cars, which are up more than 40%.
But, as KGO in San Francisco, Calif. reports, many find buying a car these days might be the easy part. Indeed, owning and maintaining one will also cost you a pretty penny.
“Drivers in your area can be expected to spend over 3% of their monthly income on gas alone,” FinanceBuzz personal finance expert Rebecca Wright noted per KGO.
“SUV drivers or van drivers, they’re 4.6% of their monthly income, which is insane,” she continued.
The state of California is known for having the highest gas prices in the nation at $5.68 per gallon, according to AAA data, but this expense often accounts for a smaller percentage of a vehicle’s budget. resident in relation to other States.
“It’s almost surprising that California isn’t in the top 10 states that spend the most percentage of their income against gas prices,” Wright added.
Not to be outdone, higher insurance rates put more strain on people’s budgets.
“You know, this is kind of an example here of inflation lurking in plain sight, because if it gets more expensive to pay for the new car after an accident or to fix your vehicle, all of that will increase the price of your insurance and we’re starting to see it now,” Bankrate US economics reporter Sarah Foster told the outlet.
“While drivers spend just under 1.9% of their annual income on car insurance, the average premium they pay in San Francisco is pretty close to $2,200 per year. So that’s higher than the national average,” she explained.
Yet even with these added costs of owning and maintaining a vehicle in mind, buying a new or used car has been an uphill battle for many.
According to the Associated Press, “Millions of people feel increasingly excluded from the new vehicle market. Instead, they compete for a reduced supply of used cars, especially the smaller, cheaper and more fuel-efficient ones. Soaring prices at the pump since Russia’s invasion of Ukraine have only intensified their urge to cut costs.
The news agency noted that, based on March prices and interest rates, the monthly payment for an average new vehicle would cost an individual $691. That figure is well above what a household with a median gross income of around $66,000 would need to spend, according to calculations by Cox Automotive and Moody’s.
But for the wealthy, it seems that price points mean little in this current market.
“I can’t imagine a situation where so many people would be willing to spend so much money,” Ivan Drury, senior executive at automotive site Edmunds.com, told The Associated Press.
“It’s just abnormal for someone to go out and spend (sticker price) or more. I can’t think of any other time periods unless it’s on specific models. And that’s every car on the road,” he concluded.
Ethen Kim Lieser is a Washington State-based finance and technology editor who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow him or contact him on LinkedIn.