Last Year’s Average Auto Expenses Reached All-Time High

The two biggest purchases that anyone will make throughout their life are virtually always the same: a home and an automobile. Whether you prefer the term “silver” or “cash, there’s no doubt that these items are pricey. Though both of these markets can fluctuate both in the buyer’s favor and favoring the seller, these purchases will almost always be more significant than anything else throughout life.

According to the National Association of Realtors, in 2017, the average home sold by an agent went for roughly $249,000. Today, though $200,000 is still a significant amount of money, it’s a much more buyer’s market for a U.S. home.

Conversely, the average selling price for a midsize vehicle during the second quarter of 2018 was $26,336, with an average monthly finance payment of $462. Midsize vehicles are certainly popular options across the country, but since truck’s skyrocket average prices by around $20,000 and other models are going for much more, the auto market is anything but buyer friendly at the moment. In fact, according to USA Today, the average price of automobiles hit an all-time high of more than $36,000 in 2018.

Creating modern cars is a complicated, and expensive process. From new fuel-efficiency standards to industrial protective coatings (industrial coatings are used for decoration and corrosion prevention), there are a variety of manufacturing costs that drive up the costs of car ownership.
New vehicle buyers have agreed to pay an average of $551 per month for 69 months, which is roughly 10% more per month than 2016 reports. Since interest rates are also rising, vehicle buyers are being forced to borrow more money than ever before and are extending their loans to unprecedented lengths.

“Easy credit and longer repayment terms have coaxed many consumers into buying more car than they can really afford,” said Ed Mierzwinski, senior director for consumer programs at the U.S. Public Interest Research Group. “It’s even worse for those who have been subjected to deceptive and predatory lending practices at auto dealers.”

Many auto manufacturers and dealers acknowledge the record-high prices, but remain optimistic due to the “very strong economy.” Did you know that for every $1 spent in manufacturing, $1.40 is added to the economy?

“Although interest rates are coming up, which obviously can increase the purchase cost of the vehicle, on a historic basis they’re still at a very low level,” added Henio Arcangeli, Jr., an executive in Honda’s U.S. division.

According to U.S. News, Americans who are struggling to afford a brand new vehicle should remember that buying a car isn’t exactly an investment, but rather a massive expense for a rapidly depreciating asset. In fact, a brand new vehicle will lose about one-third of its value within the first year of ownership.

Here are some tips for Americans who are car shopping on a budget:

  • Don’t spend more than 15% more of your monthly take-home pay.
  • Use 36% of your income to pay off your auto, mortgage, and credit card debt.
  • Spend time determining your exact budget and consider your future spending
  • Acquire trusted and affordable financing
inclue@inclue.com'

Author: Inclue

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