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Cars have always had their own place in America.
The roads are wide open, the wind in your hair, the feeling of freedom while driving. Cars have been celebrated in movies and immortalized in songs to evoke it all.
And now, that feeling of freedom comes at a very steep price. The average monthly car payment exceeded $700 in the previous month this year, the highest ever, according to Cox Automotive / Moody’s Analytics.
“I joke with people that every new car purchase is a luxury car purchase, and I don’t care what you buy,” says Evan Drury, senior director of insights at car buying expert Edmonds.
However, cars are not just a symbol of freedom.
In fact, they play an essential role in the economy. People depend on cars to go to work – 3 out of 4 Americans commute to work by car. Then there are the school dropouts, doctor’s appointments, grocery shopping and more.
However, more and more Americans owning the car is becoming untenable.
“Unfortunately for the segment of the population that may need it most, it’s becoming more and more out of reach,” notes Drury.
In fact, that high dollar figure doesn’t even account for insurance or parking for those who have to pay for it. Not to mention gas prices that have crossed $5 a gallon recently and are still hovering near these record levels.
Nor is there an end in sight in an era when interest rates are rising and the cost of borrowing is likely to rise even more.
What causes prices to rise?
The main reason behind the rise in car prices can be traced back to the shortage of computer chips that started during the pandemic.
When car sales fell dramatically during the early parts of the lockdown, automakers cut orders for chips.
Around the same time, as schools went online and worked, people bought extra laptops, iPads, televisions, video games, and other electronic goods for their homes. So chip manufacturers shifted their production to serve those companies.
Automakers make expensive cars
Other major shifts in the economy soon followed. People started moving out of crowded cities to suburban locations, and suddenly the demand for cars skyrocketed.
Car manufacturers were caught unable to make enough cars because they didn’t have enough microchips, which play a huge role in today’s cars, controlling everything from windows to the navigation screen and even passenger seat sensors.
With the limited supply of chips, automakers have scaled back the number of cars and reduced their production. They decided to put their chips in making bigger and more expensive cars — feature-laden SUVs — to get more bang for their buck.
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This also meant that automakers were making fewer compact cars and sedans, and more affordable vehicles.
The average cost of a new car exceeded $47,000
The result is that prices have jumped to astronomical levels. The average cost of a new car hovers at an all-time high $47,000 Bob.
“We’re not going to see a sudden price drop anytime soon, because there doesn’t seem to be any solution to the chip crisis,” Drury says.
And used cars? forget that. It’s just unbearable
Those who have sought relief by buying used cars also face sticker shock.
Used car prices have increased significantly more than new car prices 16.1% over last year Compared to a 12.6% jump in new car prices.
Johnny Navarro was shocked by the poster right after he had a car accident recently. No one was hurt, but his car was assembled. When he went to the dealership, he found that the monthly payments had doubled for the cars he had been looking at just a few years earlier.
“To see it jump from $300 to $600 for a Corolla or a Civic, it was like, ‘I have to drive like a Mustang for that much money, you know?'” Unbelievably, Navarro said.
But people still love their cars
After a lot of shopping, I found Navarro a used Lexus online. His car payments came to $580 a month, $200 more a month than he was making. That’s before adding up his insurance bill and parking fees in downtown Los Angeles, where he lives.
“I would definitely have to do an extra shift or two a week,” Navarro says, referring to his job as a server at a restaurant in Santa Monica, California. The only reason he got the car.
“I like to ride in my car with friends and listen to music,” he says. “I have a karaoke mic in the car.” “That’s always really fun.”
Navarro is like a lot of Americans – he loves his car. As long as he can afford it, he will own one.
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