A car will probably be the second most expensive purchase you will make after your home. Unfortunately, it could get even more expensive.
The costs associated with buying and maintaining a car are rising, which could be a sign that cars could be becoming less affordable for the average American — especially if you’re trying to stop living paycheck to paycheck.
Here are some of the rising costs to consider when buying and maintaining a vehicle.
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1. Average car payments are high
If you’re looking to buy a car, be aware that monthly car installments remain high. According to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index, the average monthly car payment in September was $738.
However, a good sign might be that the average payment was a few dollars below the record $743 level set in August.
2. It takes longer to save for a new car
If you want to buy a new car, it will cost you 44.2 weeks of average American earnings to afford a vehicle.
While that number may sound daunting, keep in mind that you could get a loan that you can pay back over time to afford a car. But paying off your car can still be a bit of work.
3. Interest rates have gone up
Interest rates do not only affect housing costs. They can also affect the cost of cars. And since the Federal Reserve is raising interest rates to curb inflation, it also means that higher interest rates could cost you more.
According to Cox Automotive and Moody’s Analytics, the average interest rate on a car loan rose 0.23% in September. That might not seem like a lot, but it could quickly add up to a good chunk of money over the life of your loan
4. Incentives decline
Sometimes dealers offer incentives to take certain models off the lot if they aren’t selling well or they need to make room for newer models. But low inventories across the country have led some traders to withdraw potential stimulus.
Incentives fell to at least a 20-year low, meaning you might pay more for a car with fewer incentives to save on the ultimate cost.
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5. Average transaction prices are high
You might not pay the record average price for a car, but you’ll probably come close to that super high level.
According to Kelley Blue Book, the average transaction price for a car in September was $48,094, down only slightly from the record high of $48,240 in August.
Pro Tip: It’s a good idea to create a budget before you start buying a car so you know how much you can afford each month in payments, maintenance, and gas.
6. Loans are getting longer
Car loans are usually granted for 24 to 60 months. However, some buyers may want to get credit for more than 60 months to minimize monthly payments in exchange for longer credit.
For this reason, loans with terms of 72 and 84 months or six to seven years are becoming increasingly popular.
It might sound like a good compromise to pay less each month when agreeing to a longer loan. However, as the car ages, you may have to take on additional maintenance and repair costs, and it may not be cheaper when you reach the end of your loan.
7. Gas prices are high
The good news is that gas prices may fall again. The bad news is that gas prices may already have hurt your wallet.
Gas peaked at $5.01 per gallon on June 14, according to the AAA. By the end of October, the average price for a gallon was around $3.76.
If you’re concerned about fluctuating gas prices, it can be a good idea to consider miles per gallon when buying a car and try to buy something more fuel efficient to save money.
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8. Americans are driving again
More and more Americans are returning to the office either full-time or as part of a hybrid home/office schedule.
But if you start commuting to the office more often again, it could cost you more money. This is due to the wear and tear on your car as well as maintenance which depends on how many miles you have driven your vehicle.
9. Americans buy for the cars they really want
For some, buying a car they can afford means they may have to sacrifice buying the car they want for a car that’s better in their price range. But others are willing to spend the extra money to get the vehicle they want.
According to Quantrell Auto Group, Americans spend on average 39% above the manufacturer’s suggested retail price or MSRP to get the car they want.
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It can be difficult to buy and maintain something as expensive as a car, but there are ways to save money despite the expense.
Remember to set aside some money for routine maintenance to avoid major problems and repairs later. And shop around to make sure you’re buying a car that fits your budget and reduces your financial stress.
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This article 9 Warning Signs Americans Are Overspending on Cars originally appeared on FinanceBuzz.