Inflation and Gas Prices Make Owning a Car More Expensive Than Ever

It has never been so much fun to be a “car enthusiast”.

In June, rising auto prices and auto loan interest rates pushed the average monthly car payment to a record high of $712, according to analysis by Cox Automotive/Moody’s Analytics. The median number of weeks of income needed to buy the average new vehicle also rose for the fourth consecutive month, reaching 41.3 weeks in May, the highest mark since at least 2012.

The cause of the currently high car prices dates back to the early days of the pandemic, when a sharp drop in demand led manufacturers to cut orders for computer chips that are crucial for car production. As demand returned — helped by stimulus and people moved out of cities — manufacturers ran out of chips, and that problem has yet to be fully resolved.

The price of new cars rose 12.6% from a year ago, and used vehicles – which have seen a surge in demand in response to the shortage of new cars – did not supply the savings that consumers might have hoped for. Prices are up 16.1%.

As the

Federal Reserve

increases interest rates to fight inflation, it also increases borrowing costs for Americans buying cars.

The increase in payments for cars does not even take into account gasoline prices, which, while potentially decreasing some in the coming weeks, remain well above what they were a year ago. So there is

car insurance

, parking and – heaven forbid – speeding tickets. According to a 2017 analysis by data and analytics firm INRIX, the average U.S. driver spent more than $10,000 on maintenance, fuel, insurance, parking, tolls, and other miscellaneous expenses, a number that likely increased in recent years due to inflation.

The “average maintenance transaction cost” for an automobile has risen from $232 in 2019 to $259 in 2021, according to fleet management company Emkay, due to rising prices for parts, labor and workforce and customers who keep their vehicles longer due to the maintenance costs of older cars. tend to be higher.

With drivers returning to the road in droves as COVID restrictions have eased, the number of accidents is also on the rise. And when a vehicle needs to be repaired, the impact of inflation on auto parts has made that process more expensive. As a result, many insurance companies have raised premiums to help foot the bill for driver complaints. According to a 2022 Bankrate report, U.S. drivers who have comprehensive insurance spend an average of more than $1,700 per year.

It’s unclear if parking rates are up, but for those without a garage, the cost can add up. According to automotive fintech platform, monthly parking in New York City costs around $550, or more than $6,000 per year. When it comes to speeding tickets, the introduction of “robot camera systems” has helped to issue more of them, especially in cities like Chicago.

While advocates argue that EVs make owning a car more affordable – due to lower fuel and maintenance costs – EV adoption has been slow. In February, less than 1% of vehicles on US roads were electric.

Despite the costs, having a car remains important for millions of Americans – analysis found nearly 92% of US households had access to a car in 2020, up from around 91% in 2015.

According to a Statista survey, 76% of Americans commute to work by car, compared to 11% who use public transport and 10% who choose to cycle. This is higher than in many European countries; in Germany and the Netherlands, for example, only 65% ​​and 56% of commuters drive to work, respectively.

In addition to the fact that Americans generally have longer commutes than Europeans – sometimes making a bicycle, for example, impractical – some experts attribute insufficient investment in public transport and cycling infrastructure to the main reasons for the division of the use of the car. According to a recent study, the United States made up just three of the world’s 50 most “bike-friendly” cities: San Francisco, 39th; Portland, 41st; Seattle, 50th.

If employers and workers continue to embrace remote working even as the pandemic subsides – one expert estimated that 25-35% of workers were remote in April – the need for cars could also decrease, allowing more people to choose “without a car”. Lives.

Until then, however, or until supply chains improve to help bring prices down, Americans should continue to pay big for their vehicles. Even the beloved “new car smell” might not be enough to lift their mood.

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