One of the reasons why Americans are holding onto their older cars is because of the high prices new cars bring. Kelley Blue Book reported the average car buyer spent $49,740 on a new vehicle in November of 2024. That's only $218 short of the record for the average price set in December of 2022.
So, why are prices so high for vehicles? In 2022, there was a limited supply driving up costs. However, that isn't the case in 2024. One of the reasons why the average car price is so high is because more car owners are preferring luxury brands, with higher price tags. Sales of vehicles $80,000 and over increased 37% compared to December of 2023.
Want to buy a new car? There are mixed signs on the horizon
Despite the trend of aging cars, there is evidence that new car prices are getting somewhat more affordable.
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Buick and Volkswagen had their average year-over-year sale prices fall by 7% and 6% respectively. And Mitsubishi's average sale price dropped by 12%, according to Kelley Blue Book.
How long will this trend hold? It depends on what the future holds. During his trip to the Super Bowl, president Donald Trump announced a 25% tariff on all steel and aluminum imported goods.
If that goes into effect, the price dips seen by some manufacturers could go away. To demonstrate, a $25,000 car imported from Canada or Mexico could increase up to $6,250, according to S&P Global Mobility.
And car manufacturers would pass that cost onto the buyer. Therefore, if you're in the market for a new vehicle, sooner than later might be your best bet before the proposed tariffs could into effect.
Other factors impacting car affordability
Of course, driving a car comes with more costs than just that purchase price, and drivers have been feeling a crunch across multiple waves.
Kiplinger's energy outlook predicted gas prices to rise. While we enjoyed lower prices at the pump for a hiccup, it appears costs are back on the upswing, with a $3.11 gallon average.
Auto insurance premiums are soaring, and, as the Kiplinger Letters team reported, new cars that feature advanced safety systems can have higher insurance rates because those systems cost more to replace in the case of an accident. There are, though, ways to save on insurance by comparison shopping:
On the flip side, however, there's always the EV tax credit if you choose to get an electric vehicle. And if you're not comfortable getting a new car quite yet with prices as they are, you can at least rest easy considering keeping a car longer is sometimes better for the environment anyways, if you don't drive all that much, according to Outside magazine.
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