Name: Rising Interest Rates and Insurance Costs Make Now the Worst Time to Buy a Car
Uploaded: 2023-09-20T09:30:00Z
Duration: 3 min 19 s
Description: Supply-chain issues have largely been resolved and inflation is cooling, but car ownership has never been more expensive. WSJ’s Dion Rabouin walks through the data showing why now may be the worst time to buy a car. Photo: David Zalubowski/Associated Press

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Supply-chain issues have largely been resolved and inflation is cooling, but car ownership has never been more expensive. WSJ’s Dion Rabouin walks through the data showing why now may be the worst time to buy a car. Photo: David Zalubowski/Associated Press

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Rising Interest Rates and Insurance Costs Make Now the Worst Time to Buy a Car

Now is a terrible, horrible, no good, very bad time to buy a car. Sure, inflation is slowing down and supply chains are coming back online, but now might be the worst time ever to buy a car, especially a new car. There are three big reasons that Americans who go car shopping right now are going to pay more and get less for their money, high prices, high demand, poor selection. I'll explain. First, let's talk about those high costs. New car prices are sky high right now. Five years ago, there were a dozen new car models that sold for less than $20,000. In 2023, there's one. The Mitsubishi Mirage Hatchback. Whoo, swaging. It's true that new car prices have been coming down since hitting record highs, but US Treasury yields recently rose their highest level in more than 15 years. We've seen a similar increase in the rates for auto loans, and the cost of financing a car hit an all time high in the second quarter, so drivers who financed their vehicle are actually paying more than when prices were higher. Car shopping website, Edmunds, found that a record 17% of customers who financed were paying more than $1,000 a month. And then there's insurance and maintenance. The latest CPI inflation report showed motor vehicle insurance costs rose by 19% from a year ago. That was the largest increase of all items in the report. And just below auto insurance was the 12% increase in maintenance costs for cars and trucks.

Protesters: Corporate greed has got to go.

Oh, and the United Auto Workers recently announced a strike at the big three automakers, so car production could slow even further. The UAW is seeking a 46% pay increase over four years, so this fight could last a while. And once it's done, car prices might just go up again. Car prices are being held up by high demand, which means there's a lot of people trying to buy. Production slowed down significantly in recent years, and that has left a shortage of millions of new cars. People didn't just stop needing new cars, because they weren't being produced, so folks who couldn't buy then are trying to buy now. That's creating something of a feeding frenzy on lots. The latest inventory report from Cox Automotive found that while inventory has rebounded from 2021 and 2022 levels, it has remained low by historical standards. And we all know what happens when there's high demand and low supply, it's hard for prices to come down very much. That lack of production in recent years also means that used cars are fewer and older than in years past. 51% of used cars sold in the second quarter were more than three years old. That's up from 42% before the pandemic according to Edmunds. So what's it all mean? It could mean that now's a good time to invest in a nice bicycle or a bus pass. The latest CPI report shows new vehicle prices have fallen in three of the last five months, and used car and truck prices have fallen by more than 6.5% from last year. So you might wanna wait or lower your standards a bit. Whatever you do, now is definitely not a good time to buy a new car.