The high cost of cars is a big issue for many people. There are a number of reasons why car prices are so high.
why are car prices so high?
According to Cox Automotive/ Moody Analytics, car payments have reached $700 per month, with an average cost of $47,000 for a new vehicle.
If you believe that used cars are the answer, think again. Last year, the price of used cars was up 16.1% compared to new cars (12.6%). Inflation is, however, only partially to blame, just like other markets.
The recent rise in car prices can be attributed to a shortage of computer chips that started during the pandemic.
Automakers saw people spend more time at home than they did driving, which led to a decrease in microchip production. However, manufacturers are now trying to get back to pre-pandemic production levels as people return to work.
Automotive News reports that chip shortages have caused North American and Europe automakers to cancel more than 104,000 production plans.
Automakers have had to reduce production and use the chips available for more expensive (and more advanced) models. This has made affordable cars less desirable.
Although it is unclear when and if prices will start to fall, things do not look good.
- Related: How to negotiate car price?
