Yahoo Autos Why buying a car is more expensive than ever in the U.S.
The cost of car ownership in the U.S. surged after Covid shut down assembly lines and made vital semiconductors scarce. Then the Federal Reserve rapidly raised interest rates to combat high inflation, making car loans more pricey. As a result, in December, the average sticker price for a new car was $48,759 in the U.S. — or a near-record $770 a month to pay off over time, according to researcher Cox Automotive.
That sticker price was almost 30% higher than in January 2019. Pent-up demand left over from the pandemic is keeping sticker prices high even as factory production has returned to full strength. Used car prices are also elevated as inventory remains low.
1. How have U.S. car prices changed?
For more than a decade before the pandemic, with supply and demand in sync and with interest rates super-low, the average monthly payment bumped along at about $400. By December 2022, almost two years into the Covid pandemic, that number had almost doubled, to a record $788 a month. New car prices have come down from a peak of more than $50,000, but higher interest — the Fed started raising rates in March 2022 —has kept monthly payments high.
Used cars aren’t much better, with an average monthly bill of $561 in November, according to auto researcher Edmunds. That’s up 37%, from $410, in late 2019.
The average overall cost of owning and operating a new car in 2023 — including fuel, maintenance and insurance — was $12,182, or $1,015 monthly, according to AAA. That’s up about 14% from $10,728, or $894, in 2022.
Even with high prices, new-vehicle sales rose 13% in December compared with a year earlier, to 1.4 million vehicles.
2. Why have car prices risen?
Although car prices have declined slightly from their peak, loan interest rates have made up much of the difference. The average rate for a new car is about 9.6%, according to Cox, up from 5.5% in late 2019. The rate for a used vehicle is 14.3%, compared with 8.2% in late 2019. That’s left many Americans struggling to afford their monthly bills.
The proportion of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September, the highest in data going back to 1994, according to Fitch Ratings. And many car owners are now underwater on their loans, which occurs when the market value of a car falls faster than the owner can pay down the loan for it. In November, Americans with negative equity were underwater by an average of $6,054, the most since April 2020 and well above pre-pandemic averages.
