Now might be one of the worst times in history to buy a new car. And if you were considering one, you may not even be able to afford it. Kelley Blue Book did the math, calculating just how expensive new cars are getting. And while there are a variety of factors that explain high prices for new cars, those factors may not be valid fairly soon.
Kelley Blue Book crunched the affordability numbers
In order to determine just how unattainable new cars are for the majority of consumers, Kelley Blue Book created the Vehicle Affordability Index. It took the average new car cost and paired it with the median income for Americans.
Right now, the average new car costs $42,000, and according to the study, it’d take the average American 37.4 weeks to be able to afford a new car. Doing some rough paper napkin math, that means Americans are making about $58,000 a year (which is what most states hover around according to Justice.gov). So it’d take them that long to save assuming if they don’t spend on other things like rent, food, and necessities.
But no matter how much you make, there’s no denying that new cars are getting ridiculously pricey. Some say inflation is to blame, but even though the average household income is slowly on the ride according to Policy Advice, it doesn’t excuse new car’s lofty pricetags
How did cars get so expensive?
We’ll start with the major elephant in the room: Covid-19. At the beginning of the pandemic, automakers slowed production thinking consumers wouldn’t be buying cars for a while. Unfortunately, that wasn’t the case. New car purchased skyrocketed after the first few months of quarantine, and automakers didn’t have the supply to meet demand. Thus, they jacked up prices.
But it’s a double whammy due to the fact that people also purchased a ton of smartphones and electronics amidst the pandemic. All the little computers in your tech use micro conductors, commonly referred to as chips. Cars use them too, and without them, they can’t manufacture finished vehicles. Ford just delayed the Mach-E due to the shortage, unable to finish the fully electric vehicles.
Sure, inflation may play a tiny part in it, but the grim reality is that automakers have very few new cars. Their production is limited, and that leads to higher prices. After all, people want what they can’t have. But if you’re a penny pincher like me, then you may want to look at the newest car with the lowest prices.
What are the cheapest cars out there today?
That title goes to the Chevy Spark, which costs just $13,600. Next in line would be the Mitsubishi Mirage, which starts at $14,295. And while the two budget hatchbacks are comparable, the Spark is more popular, and more affordable.
Let’s go back to the math from earlier. If it takes one year for the average worker to make $58,000 a year, or $1,115 a week, then it’d only take 12 weeks to afford a brand new Chevy Spark. The only drawback is they’d have to know how to operate a stick, otherwise, they’d have to tack on another two weeks of pay ($2,000).
What’s the takeaway from all this? Well, if you can help it, don’t buy a new car. Keep the one you have running, as it’ll save you time and money over the long run. Repercussions from the chip shortage and Covid are still hitting hard, and there’s no telling when automobiles will be affordable again.