You might not be in the market for anymore bleak news, and this might already be common knowledge to you if you have a new car, but Americans are paying a lot for their vehicles right now.
The average car payment climbed to $717 a month in the fourth quarter of 2022, a record high and up 50% from 2010. Back in the summer, car payments had just crossed $700 for the first time ever.
Even more terrifying is that nearly 16% of car buyers agreed to monthly payments reaching at least $1,000, which is up from 10.5% in the fourth quarter of 2021 and 6.5% two years ago.
In other words, it’s a really rough time to be buying a new car, and there continues to be a high number of Americans out there financing their cars (obviously).
But hey, at least you might get a few cool rubber ducks out of it.
So Why Are Car Prices So High?
You’ve likely heard it a million times before, but high interest rates are a big culprit of the astronomically high car prices. As the Federal Reserve keeps jacking rates up, you’ll keep paying these high car loans.
On top of high interest rates, car prices have been affected by other factors such as supply chain constraints, including a shortage of computer chips. There are fewer manufacturer discounts and incentives on new cars right now as well, which makes sense given the strong consumer demand. Which, speaking of that, car buyers are no longer opting for the more economical sedan; Americans want their more expensive, gas-guzzling pickup trucks and massive SUVs.
Even with the ever-rising prices, it hasn’t slowed down the demand for car sales all that much. And with a limited supply to this point, there isn’t much incentive for car prices to go down. But the supply of vehicles on dealer lots has started to increase, and that inventory fluctuation might provide some relief to consumers in the near future.
Still, though, there doesn’t seem to be any looming deceleration on interest rates, and the cat’s effectively out of the bag on this one. Even if rates did begin to decrease, Americans are more than fine forking over their entire income to a freaking car, so the industry is going to ride that trend as long as it possibly can.