The average price of a new car is up 21% from just five years ago.
Transcript:
Conway Gittens: Stocks held onto their gains as voters headed to the polls on Tuesday. Economic data continues to paint the picture of an economy that’s not falling off a cliff as the Federal Reserve lets the air out of inflation. On the earnings front, Yum Brands, the parent company of Taco Bell, Pizza Hut, and KFC, missed sales and profit forecasts. It blamed “geopolitical conflicts and challenged consumer sentiment.”
Earnings to come on Wednesday include Novo Nordisk, CVS Health, Qualcomm, AMC, and Lyft.
In other news – new car prices have risen so much that now – even the wealthy are having to trade down.
The average new car price jumped to $48,205 in 2024, that’s up 21 percent from the pre-pandemic years, according to data compiled by Cox Automotive. Meanwhile, car payments have risen 17 percent between 2020 to 2024, now hitting an average of $767 a month.
So what’s behind the sticker shock? Prices originally started speeding up during the pandemic due to global supply chain hiccups and work stoppages for health reasons. Prices are now higher due to all the new technology and safety features going into cars, higher raw material costs automakers are adding to the sticker price, and then there’s the cost of a car loan. The average interest rate on an auto loan in the second quarter was roughly 7 percent, according to Experian, compared to 5.7 percent the same time in 2019. The numbers are even higher for a used car – that interest rate touched 12 percent before the Federal Reserve cut rates in September.
In order to afford a new car, even Americans with six-figure salaries are stretching out payments from the traditional 5-year loan to a 7-year loan. And when the math doesn’t work on that, drivers of all income levels are turning to the used car market or keeping their current cars on the road for an average 12.6 years – that’s the longest on record.
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