Why Buying a Car Is More Expensive Than Ever in the US

The cost of car ownership in the US surged after Covid shut down assembly lines and made vital semiconductors scarce. Then the Federal Reserve rapidly raised interest rates to combat high inflation, making car loans more pricey. As a result, in December, the average sticker price for a new car was $48,759 in the US — or a near-record $770 a month to pay off over time, according to researcher Cox Automotive. That sticker price was almost 30% higher than in January 2019. Pent-up demand left over from the pandemic is keeping sticker prices high even as factory production has returned to full strength. Used car prices are also elevated as inventory remains low.

For more than a decade before the pandemic, with supply and demand in sync and with interest rates super-low, the average monthly payment bumped along at about $400. By December 2022, almost two years into the Covid pandemic, that number had almost doubled, to a record $788 a month. New car prices have come down from a peak of more than $50,000, but higher interest — the Fed started raising rates in March 2022 —has kept monthly payments high. Used cars aren’t much better, with an average monthly bill of $561 in November, according to auto researcher Edmunds. That’s up 37%, from $410, in late 2019. The average overall cost of owning and operating a new car in 2023 — including fuel, maintenance and insurance — was $12,182, or $1,015 monthly, according to AAA. That’s up about 14% from $10,728, or $894, in 2022. Even with high prices, new-vehicle sales rose 13% in December compared with a year earlier, to 1.4 million vehicles.