ADVERTISEMENT

Monthly car payments have crossed a record $700. What that means: NPR

ADVERTISEMENT


A motorist drives through flowers along the Angeles Crest Highway in the Angeles National Forest northwest of La Canada, California.

David McNew/Getty Images

ADVERTISEMENT


hide title

toggle title

David McNew/Getty Images


A motorist drives through flowers along the Angeles Crest Highway in the Angeles National Forest northwest of La Canada, California.

David McNew/Getty Images

Automobiles have long had their own special place in America.

The wide open roads, the wind in your hair, the feeling of freedom when you drive. Cars have been celebrated in movies and immortalized in songs for evoking all of that.

And right now, that sense of freedom comes at a pretty high price. The average monthly car payment topped $700 a month earlier this year, 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,” says Ivan Drury, senior information manager at car buying expert Edmunds.

However, cars are not just a symbol of freedom.

In fact, they play an essential role in the economy. People rely on cars to get to work: 3 out of 4 Americans drive to work. Then there’s back to school, doctor appointments, grocery shopping, and more.

And yet, car ownership is becoming unaffordable for more and more Americans.

“Unfortunately for the segment of the population that probably needs it most, it’s increasingly out of reach,” says Drury.

In fact, that lofty dollar figure doesn’t even take into account insurance or parking for those who have to pay for it. Not to mention gas prices that crossed $5 a gallon recently and are still hovering near these record highs.

There is also no end in sight to an era where interest rates are rising and the cost of borrowing is likely to rise even higher.

What is causing prices to skyrocket?

The main reason cars have become so expensive can be traced back to the computer chip shortage that began during the pandemic.

When car sales fell sharply during the early stages of the shutdown, automakers slashed chip orders.

Around the same time, as schools and work went online, people bought laptops, iPads, televisions, video games, and other additional electronics for their home. So the chipmakers shifted their production to serve those companies.

Automakers are making more expensive cars

This was soon followed by other big changes in the economy. People started moving from crowded cities to suburban places, and suddenly the demand for cars skyrocketed.

Automakers were caught off guard and unable to make enough cars because they didn’t have enough microchips, which play a major role in cars today, controlling everything from the windows to the navigation screen and even the sensors in the seats of your car. the passengers.

With a limited supply of chips, automakers downsized and made fewer cars. They decided to put their chips into making larger, more expensive vehicles (feature-packed SUVs) to get more for their money.


An all-new 2018 Ford Expedition SUV rolls down the assembly line at the Ford Kentucky Truck Plant.

Bill Pugliano/Getty Images


hide title

toggle title

Bill Pugliano/Getty Images


An all-new 2018 Ford Expedition SUV rolls down the assembly line at the Ford Kentucky Truck Plant.

Bill Pugliano/Getty Images

That also means automakers have been making fewer compact cars and sedans, the more affordable vehicles.

The average cost of a new car has exceeded $47,000

The result is that prices have risen to astronomical levels. The average cost of a new car is hovering around the highest level on record, topping $47,000 each.

Drury says get used to these prices: “We’re not going to see a sudden drop in price anytime soon, because there doesn’t seem to be any solution to the chip crisis.”

What about used cars? Forget it. they are just as unaffordable

Those who have sought respite from buying used cars are also facing the impact of the label.

Used car prices have soared even more dramatically than new car prices, up 16.1% from a year ago compared to a 12.6% increase in new car prices.

Johnny Navarro experienced that surprise firsthand after a recent car accident. No one was hurt, but his car was totaled. When he went to the dealership, he discovered that the monthly payments had doubled for cars he had seen just a few years earlier.


Johnny Navarro sits on the hood of his newly purchased 2014 Lexus.

johnny navarro


hide title

toggle title

johnny navarro


Johnny Navarro sits on the hood of his newly purchased 2014 Lexus.

johnny navarro

“Seeing him jump from $300 to $600 for a Corolla or Civic was like, I should be driving like a Mustang for that much money, you know?” Navarro said incredulously.

But people still love their cars.

After much shopping, Navarro found a used Lexus online. His car payment was $580 a month, more than $200 a month more than he used to pay. That’s before you add his insurance bill and parking fees in downtown Los Angeles, where he lives.

“I’m definitely going to have to work one or two more shifts a week,” Navarro says, referring to his job as a waiter at a restaurant in Santa Monica, California. Driving cuts his hour-long commute in half, but it’s not the only reason he got the car.

“I just like to ride in my car with friends and listen to music. In fact, I have a shared karaoke microphone in the car,” he says. “That’s always so much fun.”

Navarro is like many Americans: he loves his car. As long as he can afford it, he’ll have one.

sniloans