The Rising Costs of Cars and Trucks: A Sign of the Times

When we think of the costs associated with owning a car or truck, it’s easy to focus on the initial purchase price. However, recent years have seen a notable increase in prices for both new and used vehicles, which can be attributed to a number of factors. In particular, the majority of buyers these days are financing their vehicles rather than purchasing outright with cash, and this trend has had a significant impact on the overall cost of owning a vehicle. Couple this with COVID-19 supply chain issues and manufacturer-created artificial demand, and it becomes clear that we are living in a time where vehicle ownership is becoming more and more expensive.

One of the primary reasons why vehicles are becoming more expensive is due to the increase in buyers who rely on financing rather than paying cash. According to Edmunds, in 2020, over 70% of buyers took out loans to purchase new cars, up from around 50% a decade ago. The longer loan terms and higher interest rates associated with financing can add up over time and end up costing consumers much more overall.

Another factor contributing to the rising costs of cars and trucks is COVID-19 supply chain issues. The pandemic has caused significant supply chain disruptions in various industries, including the automotive industry. For example, shortages of computer chips have forced many car manufacturers to cut back on production of certain models, leading to increased demand for those that are still being produced and therefore driving up prices.

Additionally, manufacturers have been artificially creating demand for certain models by intentionally cutting back on production. This allows them to sell the cars at a higher premium and make more money overall. Consumers who are unable to purchase their desired model may instead opt for a more expensive alternative, contributing to the overall increase in vehicle costs.

Aside from these contributing factors, there are also a number of other costs associated with owning a vehicle that may not immediately come to mind. For example, routine maintenance and repairs can add up over time, as can insurance premiums, fuel costs, and registration fees.

All in all, the rising costs of cars and trucks can be attributed to a number of factors, including the increase in financing, COVID-19 supply chain issues, and manufacturer-created artificial demand. As consumers, it’s important to carefully consider all of the costs associated with owning a vehicle and make decisions accordingly. While a car or truck can be an important investment, it’s also important to make sure it’s one that is financially sustainable in the long run.