The rising prices of both new and used cars in the U.S. have made owning a vehicle an enormous financial burden for consumers.

Since the semiconductor production bottleneck caused by the COVID-19 pandemic, car prices have soared, leading to increased car payments, repair costs, and insurance premiums. As car ownership becomes a significant financial strain in a country where vehicles are essential, more people are opting to reduce the number of cars they own.

According to Cox Automotive, the average price of a new car in August dropped by 0.6% from the previous month but remained close to the record high of $48,516 from late 2022, coming in at $47,870. This means that the price of a new car is nearing $50,000. Meanwhile, the wholesale price of used cars increased by 2.2% from the previous month.

The COVID-19 pandemic has been the primary factor behind the surge in car prices. Global production cuts and supply chain disruptions led to bottlenecks, and the price of semiconductor chips used in both conventional and electric vehicles (EVs) began to spike. As a result, by late 2022, the price of new cars soared to a record high of $48,516. Consumers are now not only facing higher car prices but also rising interest rates, leading to hefty monthly car payments. The average interest rate for auto loans has recently reached 9.56%. According to the “Your Driving Costs” (YDC) study, it now costs $1,024 per month to own and operate a new car—$115 more than in 2023. Monthly car payments for new cars average $767, while used cars cost $566 and leased vehicles $558.

Soaring insurance premiums have also become a major burden. As car prices rise, the cost of repairs and tire replacements has followed suit, driving up maintenance expenses and, consequently, insurance premiums. The insurance industry reports that the national average car insurance premium in the first half of this year was $2,329, and it is expected to rise by 6.01% to $2,469 by the end of the year. Last year, the national average car insurance premium jumped by 24%, and it is projected to increase by another 22% this year. This 22% rise is 10 times higher than the Consumer Price Index (CPI).

According to the American Automobile Association (AAA), the monthly cost of repairs, tire replacements, and maintenance for new cars averages $126. Routine maintenance includes oil changes and tire replacements, typically performed every 5,000 miles, or about three times per year. With these rising associated costs, some households are struggling to keep up with car payments or are reducing the number of vehicles they own. According to the automotive media outlet The Drive, car repossessions have increased by 23% this year compared to the previous year.

One Korean resident in Los Angeles, identified as Mr. Kim, said, "My wife and I used to own one car each, but the maintenance costs became too much, so we downsized to one car. It’s tough to wake up early for carpooling, but we’re doing it reluctantly to save on costs."

Jeff Schuster, Vice President of Research and Analysis at GlobalData, said, "Consumers who were priced out of the new car market during the pandemic are still struggling with monthly car payments, and many have yet to return to the market." He added that the skyrocketing associated costs are continuing to burden consumers.

— Reporter: Park Hong-yong

<Hongyong Park>