Monthly Car Payments Are Soaring

Jun 27, 2022 2 min read
Monthly Car Payments Are Soaring

Many are feeling the squeeze…

One of the areas where people have really been feeling the pinch in the past year or so is car payments. Unsurprisingly, the average car payment in the United States reached an all-time high of $712 in May, according to Moody’s Analytics. While some might just shrug at such a figure, for some households that’s a crippling amount to be shelling out month after month.

Watch our interview with a car detailer here.

Helping contribute to the rising monthly car payments is the fact that the average new car was $47,148 in May, according to Kelley Blue Book. It wasn’t that long ago the figure was just a little over $30,000. And as you likely already know, it’s not like household incomes have increased by an additional 50% suddenly. Worse, rising costs for fuel, utilities, groceries, and other essentials are making plenty of people feel like they’re in a financial vice, getting squeezed more and more to the point of breaking.

A recent Cox Automotive & Moody’s Analytics vehicle affordability index report paints an even darker picture. Thanks to higher interest rates combined with more expensive cars, Americans on average can afford less. Quite literally, their dollars are buying them less when it comes to vehicle purchases, plus increased lending rates mean they qualify for even less expensive options, a double hit which might mean a lot of shoppers are downgrading from one vehicle class to another while paying just as much if not more than before.

Compounding the problem is of course the constrained supply of new cars, thanks in part to the microchip shortage. Demand for new vehicles is strong, causing prices to continue climbing.

All this means it would cost the average household 41.3 weeks of income to buy the average new vehicle. That’s a 19% increase from May of 2021. These are sobering facts. Surely the market can’t continue to sustain this kind of price inflation, so something has to give, if not multiple things. Exactly what those would be is up for debate.

Source: ABC News

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