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Why it’s so expensive to own a car right now, in 5 charts

By Hannah Erin Lang and Venessa Wong

Cars are finally getting cheaper – but just about every other auto-related cost, from insurance to repairs, is rising

The good news for car owners? The price of a new car is finally getting cheaper. The bad news? Just about every other cost of owning a vehicle is getting a lot more expensive.

The consumer-price index, which measures the cost of various goods and services over time, rose 3.5% in March from a year earlier, the Labor Department said Wednesday – and car-related costs helped drive the hotter-than-expected inflation reading.

Price indexes for car insurance and motor-vehicle repairs have reached all-time highs, data from the agency show.

And while prices for new and used cars have finally fallen this year – after pandemic-era supply-chain snags pushed them to record highs over the last couple of years – the cost of a brand-new ride is still significantly higher than it was pre-pandemic.

The average transaction price of a new car in February was $47,060, up about 23% from four years ago, according to the car-buying site Edmunds.

“The cost of vehicles themselves is actually coming down, but it kind of doesn’t matter,” said Sean Tucker, senior editor at automotive-research firm Kelley Blue Book. “That’s not enough for most consumers.”

Here’s a closer look at the categories that are driving up costs for car owners.

The price of car insurance is soaring

By far the most significant auto-related price jump in Wednesday’s CPI report was that of car insurance, which was up 22.2% since last March.

“I don’t think this is going to go away,” said Stephen Crewdson, a senior director in the global insurance intelligence group at J.D. Power. Car insurers have suffered losses over the last two years – and while some have stemmed those losses, not all have, so further premium hikes can be expected.

“By the end of 2024, I hope they pull back on [insurance-premium] increases,” Crewdson said.

The rising price of car parts, a shortage of body-shop workers and an increase in claims due to extreme weather have all played a role in driving up insurance rates for consumers.

The average cost of full-coverage car insurance rose to more than $2,500 this year, according to Bankrate. That’s an increase of 26% over last year.

“We’re hearing from folks who say they can afford a new car, they just can’t afford to insure it,” Tucker said.

The cost of car repairs is on the rise, too

Taking your car to the shop is also going to cost you extra these days.

Prices for motor-vehicle maintenance and repairs in March were up 8.2% from last year, according to the CPI report.

Tucker noted that more expensive repairs are partly due to the abundance of high-tech features on modern vehicles – such as sensors on a car’s bumper or windshield that can make the repairs needed after minor accidents more costly.

But a constricted supply of car parts and mechanic labor shortages are also complicating car repairs, experts told MarketWatch.

Auto loans are getting more expensive

On top of all that, many Americans are paying higher interest rates on their auto loans.

The average interest rate on new-car loans increased from 5.7% in February 2020 to 7.1% this past February, Edmunds data show.

That’s pushing up monthly payments. The average payment for a new-car loan increased to $747 in February from $575 four years earlier. Loan payments for used cars saw a similar jump.

That’s leaving some drivers with some very steep car bills.

A TikTok user who goes by the name Blaisey Arnold received thousands of comments on a video she posted to her account last month explaining her two massive monthly car payments.

Arnold explained to viewers that the monthly payment for her Chevy Tahoe SUV is $1,400, while the monthly bill for her husband’s GMC Sierra 1500 AT4 pickup truck is $1,600. The vehicles were financed at 10% and 14% interest rates, respectively, she said.

“Why did I do this to myself?” wondered Arnold in one video, which has more than 2.5 million views.

Gasoline is down from pandemic highs – but went up in March

Gas prices have played a relatively small role in car-related cost increases over the last several months, said Greg Brannon, director of automotive research at AAA.

But while the cost of a gallon of gas has fallen from a pandemic peak of $5.06 two years ago, it ticked up again in March, the Labor Department said.

The broader costs of car ownership have also been on the rise. An August report from AAA found that the average cost of owning and operating a new vehicle increased “significantly” in 2023, to $12,182 a year.

That trend likely isn’t going to change anytime soon, Brannon said.

“Unless we have a real slowdown in the economy, then we’re likely not to see it change in the next six months or longer,” he said. “For the foreseeable future, this is what we can expect.”

How have higher prices affected your life and how you think about the U.S. economy? We want to hear from you. Let us know at readerstories@marketwatch.com. One of our reporters might reach out to you to learn more.

-Hannah Erin Lang -Venessa Wong

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

04-11-24 0604ET

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