Though some cities and metropolitan areas have robust public transportation systems that can reduce one’s dependency on the automobile, most Americans commute to and from work, run errands, and transport their children using their personal vehicles.
Though cars are essential for getting around this great land, and having the latest and greatest is imperative to experience the latest safety and convenience technology, it is no secret that new car prices are as high as ever.
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According to the latest available data from Cox Automotive, the average list price for a new set of wheels in the United States in August 2024 is $46,841, with average transaction price of $47,870 that month.
Though Cox emphasizes that a third of the new models on the market have list prices below $46,000, a new study from auto-buying website Edmunds suggests that many buyers are looking at the new car market with rose-tinted glasses and will be in for a case of sticker shock.
Vehicles for sale at a Honda dealership in Fremont, California, US.
Low budgets, high expectations
In a recent study conducted by Edmunds, the experts uncovered a massive disconnect between new car buyers’ price expectations and the grim, expensive reality.
About 48% of buyers surveyed in August 2024 told the car-buying site that they expect to spend no more than $35,000 on their new rides, while 14% said their budgets are at or below $20,000.
Though the latest Cox data shows that new car prices are out of the league for most buyers, Edmunds found that there were virtually no transactions in their latest data available where buyers took home a vehicle for less than $20,000.
Edmunds made an interesting observation: the average age of a car turned in to trade in for a new one is approximately six years, meaning that the last time the average car buyer went through the motions was back in 2018.
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Edmunds also notes that “much has changed for car buyers” since 2018. Back then, automakers combated an automotive surplus with many incentives, discounts, and low interest rates. Additionally, the average car transaction was about $35,000.
This outdated mentality, which buyers reflect, is also evident in the financing department. About 75% of the buyers surveyed said that the highest acceptable interest rate for a new vehicle purchase was between 0.1% and 6%. However, in today’s world, the data shows that most buyers are financing their cars at an average APR of 7.1%, with 60% of buyers financing at rates between 4% and 9%.
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About 73% of buyers surveyed by Edmunds said they have been holding off buying a new car due to high prices, and some are holding off on some pretty major events and expenditures to afford that new set of wheels.
About 54% of respondents say they plan on working more hours or taking a second or third job to afford their next car, while 29% are holding off on vacations, 11% are holding off on a home purchase, 15% are deferring from basic monthly needs, and 5% are skipping medical procedures.
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