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Vehicle prices are still sky high these days, even as the market frenzy cools — averaging more than $48,000 for a new vehicle and $28,000 for a used one.
History has repeated itself countless times over the past two years: bottlenecks in the supply chain resulted in fewer cars, leading to skyrocketing prices and contributing significantly to inflation.
But that’s only part of the picture. When it comes to car ownership, inflation has also impacted the budgets of almost every adult in the United States, regardless of how much they earn, where they live, or what their occupation is. Even Americans with paid-off vehicles are seeing costs rising.
“Even if you don’t buy anything new or used, your continued relationship with your car is becoming more expensive,” said Ivan Drury, director of insights at automotive data site Edmunds.
Maintenance and Repair: Rising faster than inflation. Insurance premiums: on the rise. Fuel? Gasoline and diesel are both well above pre-pandemic levels.
Leonela Garcia, a single mother of two in Southern California, has to commute 50 miles to her job as a dental assistant and office manager. She has been driving her 2011 Kia Optima for almost a decade. It was a reliable drive until that moment on the freeway when she learned what a blown head gasket sounds like. She was faced with a $5,000 bill for a mechanic.
The figure shocked her and kind of stuck with her.
“I wish I could just afford it,” she said. “But you know, everything is so expensive.”
In recent years, the cost of repairing and maintaining a vehicle has been slightly higher than inflation, according to the Consumer Price Index, the most commonly used measure of inflation. And then they skyrocketed this year.
The cost of servicing an older vehicle, particularly one that is well past the warranty, is typically higher than servicing a new vehicle that has just rolled off the lot.
And many people are sticking with their cars longer, with the average age of a vehicle on the road now exceeding 12 years. Today’s vehicles are better made than those of a generation or two ago and simply go further with fewer problems. That’s probably one reason why Americans overall spend a smaller portion of their household budget on transportation today compared to the 1980s.
But individually, says Drury, if you drive long enough, “you’ll find out what it’s like to change the timing belt for the second time. You’ll find that, hey, labor costs have gone up…certain parts are getting harder and harder to find.”
It’s easy to find a used car…at a certain price
Given the high cost of repairs a few years ago, motorists might have looked for a replacement vehicle instead. But now, cheap ridesharing is extremely hard to find in the used car market.
“The lower the price, the scarcer the stock” said Brian Moody of Autotrader.
There are many options for used cars in the $35,000 range and up – 65 days worth of inventory, according to internal data of his company.
It’s half that for cars under $10,000.
“There’s an abundance of used cars,” Moody said. “But we’re still talking about cars that are trading in the $25,000 to $28,000 range. Well, where I’m from, that’s a lot.”
In short, there are many pretty Cars float around. Not many bargains.
And that applies even more to the new car market, where prices have risen dramatically.
For these amazing prices, new car buyers are getting some remarkable vehicles. Americans are buying huge trucks and SUVs (although they could do with a sedan). They buy more luxurious vehicles. And they buy Cars packed with sensors and cameras and state-of-the-art security features.
This isn’t quite the same as normal inflation, where, for example, the price of a gallon of milk goes up. For all the extra money they spend, new car buyers are getting much better cars.
“Milk is still milk. Cheese is still cheese,” said Drury of Edmunds. “But your car, even if you bought it straight away [make of] A car 20 years ago is no longer the same car today. Billions of dollars have been put into it and you get the results of that.”
New cars may be luxurious, but cars aren’t just luxury. For many people, they’re a necessity for getting to work, doctor’s appointments, the grocery store, and pretty much anywhere. This necessity comes with a cost: commute time, air pollution, climate change, traffic deaths and of course a significant financial drain.
And while new car buyers get new car perks, those who need to buy and own older cars are paying a lot more for the same thing, or even less than what they’re used to.
Take Leonela Garcia, who was considering upgrading her vehicle. With her bad credit, the only loan she was approved bore 28.9% interest. Her answer – “Who does the?”
Then there were the used cars, which she saw: “I look at the prices and it’s… it’s ridiculous.”
Rather than an upgrade, she decided her best bet was sitting right there in her driveway, blown head gasket and all. Your Optima doesn’t move, but it’s sparkling clean.
“I wash it,” she said, “because I don’t want the paintwork to be ruined because I’m like in my head, ‘I’m going to make this car run.'”
Garcia started GoFundMe and raised a few thousand dollars through this and other donations. She plans to ask her family to help her borrow money to cover the difference. She is a little surprised at the thought of putting so much money into her old Optima.
“It’s just still mind-blowing how much auto parts and labor and all those little things in between can cost,” she said.