The average car is becoming less affordable for the average person, with typical monthly payments hitting record highs.
Affordability for new cars climbed for the fourth straight month in May, with monthly car payments averaging $712 a month, according to a report from Cox Automotive and Moody’s Analytics.
“Unfortunately, it’s increasingly out of reach for the people who may need it the most,” Ivan Drury, senior manager of insights for car buying expert Edmonds, told NPR’s Difficulties in Buying a Car.
New-vehicle prices rose 12.6 per cent over the past 12 months, according to consumer price index data for May, which, combined with rising interest rates, has made monthly repayments higher than ever.
Used cars saw an even bigger increase, up 16.1%.
Used car prices continue to climb as gasoline prices, supply chain backlog drive demand
According to the Kelly Blue Book, the average purchase price for a new car in May was $47,148.
“I joke with people that every time you buy a new car, you’re buying a luxury car, and I don’t care what you buy,” Drury told NPR.
Middle-income buyers excluded from the new car market
The Cox and Moody’s report said the average income it took to buy an average new car was 41.3 weeks in May.
A major reason for the price hike is the continued shortage of computer chips that run many of the major functions in modern vehicles. According to Cox Automotive’s Rebecca Rydzewski, things probably won’t get any worse, but there’s no sign they’ll get better anytime soon.
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“Prices for both new and used vehicles are showing signs of stabilizing, and price growth is likely to decline through the summer as the anniversary of the ‘big squeeze’ in inventory passes,” Rydzewski said in a statement to the Cox Report in June. “However, no one should expect prices to fall, as tight supply in new markets will keep prices high in 2023.”