The expense of car ownership has surged dramatically, with insurance premiums skyrocketing by a staggering 40% in just the past two years alone. This steep increase in insurance costs is just one of the many factors contributing to the ballooning expenses associated with owning and operating a vehicle.
The average monthly payment for a new car has almost doubled from around $400 to nearly $788 per month. This increase can be attributed to a variety of factors, including higher interest rates, which have risen since March 2022. Consequently, the average interest rate for a new car loan is now around 9.6%, up from 5.5% in late 2019. This hike in interest rates has had a direct impact on monthly payments, making them significantly higher than they were just a few years ago.
In addition to the rising cost of insurance and monthly payments, the overall cost of owning and operating a new car in 2023 has climbed to an average of $12,182 per year, or about $1,015 per month. This figure encompasses expenses such as fuel, maintenance, and insurance, highlighting the substantial financial burden that car ownership now represents.
One significant contributor to the escalating costs of car ownership is the increase in the average transaction price for new cars. As of April 2024, the average transaction price for a new car was $47,244, down 2.2% year-over-year but still significantly higher than in previous years. This price increase has been driven by a combination of factors, including supply chain shortages and increased demand for more sophisticated and technologically advanced vehicles.
Furthermore, the cost of used cars has also risen dramatically. In December 2022, the average used car price was $26,500, up 27% from a year earlier. This increase in used car prices is due in part to a shortage of new car inventory, which has led many buyers to turn to the used car market, driving up demand and prices.
The cost of car ownership has been on an upward trajectory in recent years, with insurance premiums, monthly payments, and overall costs all seeing significant increases. This trend is driven by a combination of factors, including higher interest rates, increased demand for new and used cars, and supply chain challenges. As a result, car ownership has become a more expensive proposition, requiring careful consideration and planning for those looking to purchase or lease a vehicle.
What OTHER reasons have raised car prices in your opinion?