For the average American family, getting a new car every few years was a regular occurrence. However, a variety of factors over the past few years has made buying a car a bigger deal.
With average prices reaching over $47,077, car shoppers are having to dig deep for a new vehicle. This isn’t limited to the US, but is reflecting trends across:
And other countries in Europe.
Car prices rose dramatically over the past few years, with each year breaking records.
- In 2019, the average car price rose by almost $1800
- A year later, it was over $3300
- In 2021, that figure almost doubled with average car prices more than $6220 higher
That means that a brand-new car costs around a sixth of what the average American family takes home annually. With inflation soaring and demand high, many Americans may think twice about a new car.
We take a look at the reasons behind the remarkable price rises including cost of materials and production. We also offer some guidance on what Americans can do to afford a car in the current climate.
Why car prices have risen so much since 2019
There are a number of reasons that car prices continue to rise over the past few years. These include:
- The COVID-19 pandemic
The pandemic has had a significant impact on the global economy, including the automotive industry. It initially caused a number of disruptions to the supply chain, including factory shutdowns and delays in parts delivery.
- Chip shortage
There has also been a shortage of semiconductors, which are used in a variety of electronic devices, including cars. This shortage made it more difficult and expensive for automakers to produce new cars, so demand became higher.
Prices increasing and a fall in the purchasing money of the cash in your bank are in the news daily. Inflation has been rising in the United States in recent years, which impacts how much cars sell for.
- Cost of labor and materials
Labor costs are higher in the US than many other car-producing countries. This drives up the cost of production and is reflected in the price tag.
- Demand for advanced features
Customers that want a new car are interested in the latest features such as advanced safety and entertainment units. These don’t come cheap, so the cars are more expensive.
Ways to afford a new car
If your car is looking less than shiny these days, you have options. Consider how much you can set aside monthly to invest in a new car.
- Look for financing options with low-interest rates. This can save you hundreds or thousands of dollars over the length of the loan.
- Consider a wheel payment plan. This means that you’ll pay smaller amounts off your car loan, though the interest may be higher.
- Explore lease-to-own programs offered by different leaderships.
- Look for a car that has good fuel economy. It may mean something smaller than you have but can save you money over time.
- Check out which cars are the most reliable. You can save money on repairs with more trustworthy models.
- Negotiate with dealers, if they know you, they may be inclined to give you a better deal.
- If your car has really seen it’s best days and you’re struggling, consider buying a used car. Ideally choose one from a dealer with a warranty, as it’s been checked.
Don’t forget to factor in car maintenance and repairs plus insurance when budgeting for a new car.
Will prices continue to rise?
The semiconductor chip shortage is ongoing and raw materials are increasing in price, both of which impact car sales.
As demand currently outstrips supply, it is likely that car prices will continue to rise over the next three years. Therefore, it would be better to buy now before prices go higher.