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Soaring prices make car ownership a distant dream for middle-class Americans
- The average price of a new car in the US has jumped to almost US$50,000, an increase of 30 per cent since 2019, according to JPMorgan
- Ford CFO John Lawler said he expects new-car prices to fall 5 per cent in 2023 as carmakers offer huge discounts to boost sales
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A shiny new car in the driveway has been an emblem of middle-class prosperity for generations. But for the typical American family, it’s now a distant dream.
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The average monthly payment for a new car has soared to a record US$777, nearly doubling from late 2019, according to Kelley Blue Book owner Cox Automotive. That’s almost a sixth of the median after-tax income for US households. Even used models have climbed to US$544 a month on average.
The sticker shock extends well beyond the US, where inflation is a thorny a political issue for President Joe Biden as the 2024 election looms. In Europe, prices are flirting with records. Used-car prices soared in Japan last year, and in China, a rapid push to electric vehicles (EV) means consumers will have to pay more in some cities.
At the root of the problem is carmakers’ new mantra: keep inventory lean and price tags fat. Three years after the pandemic triggered a global shortage of semiconductor chips and crippled car manufacturing, Ford Motor, General Motors and their overseas rivals are notching big profits. Even as the chip crunch shows signs of easing, they’re pledging to keep production in check.
And because EVs cost about 25 per cent more than the average car, the shift to plug-ins is about to make the affordability crisis even worse. Add soaring interest rates to the mix, and new cars – like home ownership and a college education – are fast becoming the domain of the rich.
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