Owning a new car isn’t something that people I spend time with often do. In fact, they don’t even talk about aspiring to own a new car because prices are simply too high. While that might be an indication of one’s station in life, data is now backing up the idea that for most Americans, a new car is out of their budget.
That data comes from Cox Automotive, a company that calls itself the world’s largest automotive service organization. They do a lot of business surrounding the automotive market so they know a lot about pricing and trends. Cox says that the average monthly payment for a new car sits at $777, or almost double what it was in late 2019.
According to JP Morgan, the average price of a new car sits at around $50,000, or roughly 30 percent above what it was in 2019. What’s at the heart of such a gigantic jump? Well, the pandemic, the chip shortage, and other factors didn’t help, but by now many expected relief.
Read: Average New Car Prices Dip 0.6%, But Luxury Cars Take Larger Market Share
Bloomberg describes the problem as one created by the auto manufacturers themselves: “At the root of the problem is automakers’ 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 Co., General Motors Co. 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.”
Notably, it also points out that even though last year was the slowest in terms of total vehicles sold in the U.S. (approx 13 million), in a decade, some companies, like Ford and General Motors, saw financial gains. Ford saw a 4.4 percent rise in gross profit while GM’s adjusted earnings grew by some $200 million to a total of $14.5 billion.
Moreover, things aren’t going back to the way they were before the pandemic in terms of pricing or inventory levels. That’s not us saying it, it’s the automakers themselves. “We’ll never go back to the inventory levels that we were at in the past,” said GM Chief Executive Officer Mary Barra last year.
Judy Wheeler, vice president of U.S. vehicle sales for Nissan, said in an interview that “We’ll keep that supply and demand in a level state.” It looks like the new normal is an automotive market for the wealthy only. If markups and flippers on auction websites are anything to go by, we shouldn’t be surprised.
