America has always had a special place for cars.
You feel free to drive on the open roads and feel the breeze in your hair. Movies and songs have made cars a central part of popular culture.
Right now, this feeling of freedom comes at a very high price. According to Cox Automotive/Moody’s Analytics, the average monthly car payment was $700 in January, which is the highest ever recorded.
Ivan Drury is the senior manager of insight at Edmunds. He jokes with people that every car purchase is a luxury purchase.
Cars are more than a symbol for freedom.
They play an important role in the economy. Cars are a key part of American life. 34% of Americans commute by car to work. There are also school drop-offs and doctor appointments. Groce shopping is another example.
Yet, owning a vehicle is becoming more expensive for Americans.
Drury says that it is becoming more difficult for the people who most need it.
This high-dollar figure does not include insurance and parking costs for those who need it. Gas prices have risen to $5 per gallon in recent years, and they are still at record highs.
In an era of rising interest rates and increasing borrowing costs, there is no end in sight.
The main reason that cars have become so expensive can be attributed to the shortage of computer chips that began during the pandemic.
Auto manufacturers cut orders for chips after car sales plummeted in the first part of the lockdown.
People bought more laptops, tablets, TVs and other electronic goods at home as schools and jobs went online. Chip manufacturers began to shift production to these companies.
The economy saw other major shifts soon after. People began to move out of cities and into suburbs, and suddenly the demand for cars exploded.
Microchips were a key component of today’s automobiles. They control everything, from the windows and navigation screens to the passenger seat sensors, so auto manufacturers were left with no choice but to stop making enough.
Automakers had to cut back on production due to a shortage of chips. To get more bang for their bucks, they decided to make bigger and more expensive vehicles aEUR”, SUVs packed with features aEUR”.
This also means that the less expensive vehicles are being made by automakers, such as sedans and compact cars.
As a result, prices have reached astronomical heights. The average price of a new car has risen to $47,000 per pop, which is the highest recorded level.
Drury advises that you get used to these prices. “We are not going to experience a sudden drop in price anytime soon because there doesn’t seem to have been any resolution to the chip crisis.”
People who bought used cars for relief are also experiencing sticker shock.
Prices for used cars have risen more than prices for new cars, by 16.1% compared with 12.6% in new car prices.
Johnny Navarro was in sticker shock after a car accident. His car was destroyed, but no one was hurt. He discovered that his monthly payments for cars he had only looked at a few years ago had more than doubled.
“To see it go from $300 to $600 for either a Civic or Corolla was like, I should have been driving like a Mustang for that amount of money, you know?” Navarro was incredulous.
After much research, Navarro was able to find a used Lexus online. His monthly car payment was $580, which is more than $200 less than what he used to pay. This is before he adds in his insurance bill, and parking fees in downtown Los Angeles.
“I’m definitely gonna need to probably pick up a few more shifts per week,” Navarro said, referring to his job at Santa Monica’s restaurant. But that’s not all the reason he bought the car.
“I like to ride in my car with my friends and listen to music. He says that he actually has a carpool Karaoke microphone. It’s always great fun.
Navarro is like many Americans aEUR” he loves the car. He’ll own it as long as he has the money.
