New cars becoming unattainable for many, report says
May 9, 2023, 4:15 PM | Updated: 4:30 pm
FILE -- This Nov. 15, 2020 photo shows a long row of unsold used Highlander sports-utility vehicles sits at a Toyota dealership in Englewood, Colo. (AP Photo/David Zalubowski)
(AP Photo/David Zalubowski)
SALT LAKE CITY — A news report from NewsNation says buying a new car may be out of reach for many Americans.
The report points to rising car prices — $12,000 higher than they were five years ago. This, along with higher interest rates, make buying a new car unattainable.
What’s behind this trend in new car prices?
New car prices are impacted by chip supply issues, inflation, and higher interest rates. And automakers investing more in luxury brand vehicles. These are all behind the huge jump in the average price of a new car in the United States according to NewsNation correspondent Ryan Bass.
“It is pricing out the average American from going for, let’s say, a base model. Because a lot of these production companies are now shifting costs to luxury models.”
Related: New car smell might come with a price you don’t want to pay — cancer risk
So how is this affecting car buyers? Bass said that while spending by the “lowest 20% of earners in the U.S.” has fallen to its steepest level in 11 years, the highest percentage of earners are buying cars in record numbers.
But, he had this advice for anybody who is in the market for a new car — wait.
“If you can wait toward the end of the year, that’s when you’ll start to see some more savings in terms of — a lot of these dealerships trying to get cars off the lot to make way for the new model,” Bass said.
And he said that May isn’t necessarily a bad month to buy a car either, because of inventory turnover at the dealerships.
How do you know when (if) you’re financially ready to buy a new car?
If you can’t wait to buy, how do you know if you can afford to buy a new car? Gericka Espinoza, a financial planner with DMBA says the answer is simple: do you have enough money?
“That’s the straightforward answer,” Espinoza said. “But a lot of people are looking at the debt ratio specifically because a lot of people just buy a car on debt.”
Related: Used car prices dropping but supply still low
“I would take 36% of their gross income and make sure that all of their debt, their home, their cars, student loans, consumer debt, all of that, is underneath 36%. If your brand new car can fit underneath that, then it’s considered an appropriate amount of debt.”
Essentially, Espinoza said you can feel comfortable about going into debt for a new car if you don’t have a lot of other debt already on your shoulders.
And there’s another option. If you think you can afford the new car right now, using that 36% parameter, Espinoza asks if you can hold on to your old car and save the money you’d spend if you bought it today.
“Can you hang on for two years and save that amount? (If so) you cut your loan payment in half.”
Finally, don’t forget the other costs involved in driving a new or used car: gasoline, insurance, and repairs.
KSL NewsRadio asked our listeners if new cars were unattainable for them. Join the conversation below.
Contributing: Simone Seikaly
