Car affordability concerns won’t go away anytime soon, data shows
The cost of owning a vehicle in the U.S. has soared over the past few years, and data indicates Americans are likely to be hit with even more sticker shock.
A recent report from auto shopping guide Edmunds points to a notable disconnect between what car buyers plan to spend on their next vehicle versus the average prices for new and used vehicles on dealership lots today.
Edmunds found that 73% of consumers report that they have held off purchasing their next vehicle because of elevated prices, which have surged since the pandemic due to supply chain issues and low inventory.
Nearly half of new car shoppers (48%) surveyed in the study said they would like to spend $35,000 or less on their next vehicle, and 14% said they’d like to spend $20,000 or less.
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However, Edmunds data shows the average transaction price for a new vehicle was $47,716 in July, and there were nearly zero new auto transactions under the $20,000 mark.
Prospective car buyers can also expect an unpleasant surprise in financing for their next ride.
The report found three out of four used car shoppers are targeting an interest rate between 0 and 5%, but six out of 10 car buyers who financed a used vehicle purchase in July ended up with an interest rate between 6% and 11%.
Insuring a vehicle is set to climb, too. A report released by Insurify last month found auto insurance premiums rose 15% in the first half of 2024, and the company projects the increase will reach 22% on the year.
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It appears most consumers know they will have to prepare to pay more for a vehicle, with 54% of car shoppers telling Edmunds they plan on working more hours or taking on a new job to afford their next vehicle purchase. But the higher costs might be more than many had bargained for.
More Americans are already having more difficulty making their car payments this year.
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A recent study by Cox Automotive found the volume of repossessed vehicles at Manheim auctions, the largest wholesale marketplace, is up 23% year over year through the first half of 2024. They are also up 14% compared with the same period in 2019, according to the data.