ATLANTA–For the first time ever, the average monthly car payment in the U.S. has crossed $700 a month, the highest on record, according to Cox Automotive/Moody's Analytics.
"I joke with people that every new car purchase is a luxury car purchase, I don't care what you're buying," Ivan Drury, senior manager of insights at Edmunds told NPR.
But with three out of four Americans relying on a car to get to work, in addition to getting to school drop-offs, doctors appointments, grocery shopping and more, Drury added more seriously, "Unfortunately for the segment of the population that probably needs it the most, it's getting more and more out of reach.”
NPR noted the spike in payments is directly related to the spike in car prices, especially used vehicles, all of which can be traced back to the computer chip shortage that started during the pandemic. Moreover, during the pandemic many people moved from urban areas to more suburban and rural areas, which requires having a car.
Bigger Cars, Bigger Payments
“With a limited supply of chips, automakers cut back and made fewer cars,” reported NPR. “They decided to put their chips into making bigger, more expensive vehicles — SUVs loaded with features — to get more bang for their buck. That also means that automakers have been making fewer compact cars and sedans, the more affordable vehicles.”
All of that has driven the average cost of a new car to more than $47,000.
"We're not going to see a sudden drop-off in price anytime soon, because there doesn't seem to be any resolution for the chip crisis,” said Drury.
Used Car Prices Up 16%
Meanwhile, as credit union lenders are aware, used car prices have shot up even more dramatically than new car prices, up 16.1% from a year ago compared to a 12.6% jump in new car prices.
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