BUFFALO, N.Y. — A combination of inflation and higher interest rates may be driving the American dream of owning a car out of the picture for many consumers.
And, according to one car buying expert, the moves manufacturers to remain profitable aren't helping any.
The average price of a new car has increased by 30% since 2019 and has reached $50,000 according to JP Morgan.
On top of inflation, interest rates continue to climb, meaning you'll pay more to borrow the increased amount of money you may need for a vehicle purchase.
"It's not a good mix," said Zach Shefska of CarEdge, which provides resources to consumers on selling, purchasing, and financing vehicles, as well as information on warranties and insurance.
"Every aspect of buying and owning a car has gotten more expensive and outpaced the rate of inflation so it's important to be more knowledgeable," Shefska told 2 on Your Side.
Sticker Shock
The average monthly payment for a new car is now a record $777, according to Kelley Blue Book owner Cox Automotive.
However, according to Shefska, there's more at play than inflation and higher interest rates.
Manufacturers are not only producing a few cars, but also eliminating lower trim packages on many models, making what's left more expensive, and more profitable.
"They are intentionally choosing to target a more upscale clientele," he said.
In some regard, it's working.
"In January one in five new cars sold was a luxury vehicle. That's the highest amount ever recorded," noted Shefska.
There are, however, some manufacturers bucking that trend.
"This includes Stellantis, which includes the former Chrysler, Fiat, Dodge, Ram, and Jeep lines," said Shefska. "And some automakers like Mazda still offer very competitive sub $35,000 models and have not cut back on allocations of their lower trim level quite as much."
Sticker shock may send many customers who normally shop for new cars seeking used models instead.
"But as more people are taken out of the new car market that's also driving used car prices up...and the scary thing there is that they are up 45 percent from pre-pandemic times."
It's reached a point where the average monthly payment for a used car has grown to $544 a month.
At the same time, insurance costs are up an average of 14 percent, and the push to electric vehicles isn't expected to drive average costs down, as they are generally up to $25,000 more than compatible models which use gas.
"Everyone is talking about pushing to EVs but the average price one is $60,000," Shefsak said.
What to Do?
The trend to keep production lines thin and profits fat may price many out of the car market entirely, especially if the monthly payments encompass too much of their monthly income.
With interest rates as high as they are, Shefska says it's important for car buyers to shop around for the best deal on a loan and to consider putting more cash down.
It's also important to remember that if used car prices are up so much, your current vehicle may be worth more than you might think, so it's important to maximize the amount received for the trade-in or sale of it.
And while it may defy the traditional thought, you may be better off financially keeping your existing car, even if in need of some hefty repairs, than entering the market for another vehicle right now.