Rising Costs of Car Ownership
Owning a car is becoming more expensive. While the prices of new and used cars might be down slightly, the overall cost of having a vehicle is on the rise. This increase is due to higher interest rates on auto loans and climbing insurance premiums.
Auto Loan Interest Rate Increases
The average interest rate on a six-year auto loan jumped to 8.41% in February, a sharp increase from 6.97% the previous year. This increase in rates means buyers are paying a lot more over the life of their loans.
Soaring Insurance Rates
Insurance rates have also significantly increased. Between April 2023 and April 2024, auto insurance rates rose by 22.6%. These percentages translate to hundreds of additional dollars per month.
Expert Insights
Experts note that the all-in cost of car ownership might be surprising if you haven’t been shopping for a car recently. Rising auto loan rates have had a big effect on the market, with the average buyer now paying an additional $10,668 in interest over the loan’s duration.
High monthly payments are making it tough for some potential buyers to fit a car into their budget.
Other Factors
Gas prices and regular vehicle maintenance costs, like oil changes, are also affecting household budgets. A recent survey showed that many Americans find vehicle maintenance and loans among the hardest expenses to handle.
Why Car Prices are Falling
Despite rising costs, new vehicle sales in the U.S. rose almost 5% in the first quarter of the year. Inventory is increasing, and dealerships are providing more discounts to attract buyers. The average price of a new car was approximately $49,111 in May, down 1.5% from the previous year, but Americans are still struggling to keep up with payments.
The average used car price was $28,910, down 6.3% from the year before.
Auto Debt Increases
Americans currently owe $1.6 trillion in auto debt, an increase of $55 billion from the previous year. More car owners are having trouble keeping up with their auto loan payments. The rising costs of car ownership are definitely affecting consumers.
