High Car Prices Make Owning a Car a Dream for Many Americans

About 82% of Americans currently do not have the ability to afford a car. Illustrative image: ET.

According to Carscoops, the high average price of new cars in the US combined with the limited number of affordable options has made the dream of owning a car increasingly distant for most Americans.

Since 2020, the prices of both new and used cars in the US have shown significant growth.

According to Carscoops, the manufacturer’s suggested retail prices of new cars in the US are now over 30% higher than before the pandemic. The situation in the used car market is not any more optimistic, with average prices currently about 38% higher than pre-pandemic levels.

In 2023, the pace of car price growth in the US has shown signs of slowing down, with an increase of only 1% compared to the previous year, according to Newsweek. However, the average price of a new car in the US remains relatively high, currently at $50,364, while used cars have an average price of $31,030 in the secondary market.

The high car prices in the US are making car ownership difficult for many people. Illustrative image: BCG.

According to a study conducted by Market Watch, an American household needs a minimum combined income of $100,000 per year to afford a new car at the average transaction price. The average income per person in the US is over $50,000 per year.

This figure is based on the widely accepted financial principle that monthly car expenses (including the cost of the car, insurance, and maintenance) should not exceed 10-15% of the total income.

Based on this criterion, up to 60% of households and 82% of individuals in the US currently do not have the ability to afford a new car, according to Carscoops. The specific preference of Americans for crossover, pickup, and SUV models – which have higher prices than the average – makes car ownership even more difficult for customers in the US market.

“Consumers are currently paying more attention to car amenities and technologies such as cameras, sensors, radar, and infotainment screens. These factors are reducing the availability of low-cost car options, thus driving up the average price of new cars,” said Joseph Yoon, an expert at Edmunds.

Amenities and technologies in cars are driving up car prices. Illustrative image: BMW.

However, according to Carscoops, the main reason for the high car prices in the US can be attributed to the pandemic.

Specifically, the current shortage of raw materials has disrupted production and affected the availability of new cars in the market, driving up the prices. This, along with the surging demand from customers, has also led to a growth in the prices of used cars in the secondary market over the pandemic period.

Although the supply is now stabilizing, experts believe that car prices, both new and used, in the US market will not significantly decrease in the near future.

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