A new car in the driveway has been a symbol of the American dream for generations. Not anymore – now it’s only a distant memory. The average price of a new car reached a record high in December 2023, to a whopping $50,000, according to Fortune.com. That’s a 1.4% hike since November, and roughly a 60% increase over the last decade.
The average monthly payment is now $777 a month. MotorTrend says you need to make at least $100,000 a year to afford a new car payment.
To add insult to injury, according to the 2023 US Auto Insurance Study from J.D. Power, 31% of car insurance companies increased their rates in 2023. Overall, the industry reported an average price increase of 15.5% while some states, like Florida, saw car insurance rates rise as much as 88%.
Supply chain issues during the COVID-19 pandemic sent prices skyrocketing, but that’s in the rear view mirror, and new car prices still remain at an all-time high. There are many reasons for this:
- Inflation. You’ve heard it before, you’re hearing it again. The cost of building a car is more expensive than ever. Labor, assembly, and parts are more expensive but that’s only half the story. The cost of operating a factory is more expensive, too.. From electricity to general maintenance and upkeep, from repair and transportation, prices continue to rise and the manufacturer passes all these costs onto you.
- The new UAW contract has already caused the price of new vehicles to climb, and the full force hasn’t hit yet.Ford estimates that the contract will ultimately raise costs by $850 to $900 per vehicle.
- Shifting consumer preferences towards pricier crossovers & SUVs. raises the average median price. This adds to the index – but only marginally.
- Electric vehicles cost about 25% more than the average internal combustion (ICE) car, and the shift to plug-ins is making affordability even harder. Add soaring interest rates to the mix, and new EV’s have become the domain of only the rich.
- The root of the problem, according to Fortune, is the car maker’s new mantra: Keep inventory lean and price tags fat. Three years after the pandemic triggered a shortage of semiconductor chips and crippled car manufacturing, Ford Motors, General Motors. and foreign manufacturers are notching up big profits. Even as the chip crunch shows signs of easing, they’re pledging to keep production in check. In other words, MSRP of most new vehicles will not come down.
Companies like General Electric are pushing for alternatives, like ridesharing. autonomous vehicles, and other futuristic plans to eliminate the American dream of owning a car, but will this be a shift in consumer vehicle engagement? We think the American’s love of owning their own vehicle will override any of these next-generation scenarios.
So, will car prices ever go down again? When you take a hard look at all the facts, the days of the buyer being in the driver’s seat are over and a new car in every driveway will never be the world we live in again. You will just have to grit your teeth and pay through it if you want the freedom and independence that comes with owning your own car.