If you’ve purchased a car lately, you may have had a near death experience. You walked up to what looked like a “normal” car, checked the price tag, and BOOM! A firm punch in the proverbial gut. 👊
Car prices are through the roof. The average price of a new car is now $49k, up from $38k in 2019. Used cars aren’t much better, at almost $27k. Five years ago cars over $60k were only 5% of car sales, but now they’re over half!
SO WHAT HAPPENED❓❓
Here are Five Fast Facts on what’s driving car prices higher:
- 🤷 It Is What It Is - To a certain extent, the overall economic situation is responsible for part of it. Interest rates were raised to fight inflation (link), and qualifying for a loan is also harder due to the banking crisis. Welcome to the non-recession recession!
- 💨 A Gap In The Process - We all know the world shut down during the pandemic. Coming out of that we saw loads of supply shortages on things like computer chips and other car parts. Put all that together and we got some major gaps in car production. It hit new car sales then, but is hitting used car sales now. It’s like an equal opportunity car hammer - no production line is safe!
- 🤔 Short Term Choices - With limited supplies and workers, car makers had to choose carefully which cars they made. Not surprisingly, they went with high margin cars that sold the best, which meant expensive SUVs and trucks. That also meant the supply of low cost cars went way down, so supply and demand says even the “cheap” cars now get more pricey. #sadtrombone
- 📉 Long Term Decisions - Over the last few years, all of the big American car makers have chopped their sedan lineups. In fact, Ford now only has two models left. The reason? They don’t make as much money and don’t sell as well. They’re basically giving up on the market and letting Japanese and Korean car makers have it. But those are most of the low cost cars on the market. Just a small detail, right?
- ⚡ Going Electric - Compounding the problem, the government has now forced the hand of car makers to push them into electric vehicles in the near future, which are even more expensive than gas cars. This is the wave of the future, they declared. But only if you can afford it, replied Reality.
🔥Bottom line: It’s a complex problem with several causes. Sure, SUVs and trucks have gotten to the point where they drive like sedans, have gas mileage like sedans, and have most of the same creature comforts as sedans. But the kicker is the cost, and that’s not good for Paychecks. Don’t plan on things changing any time soon, either.
What’s been your recent experience with buying a car?
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