For many people, owning a car is more of a need than a luxury. However, this year's sky-high car costs have forced some customers to postpone car purchases or find other ways to cover the expense of their already burdensome auto loan instalments.
And that's a major issue at a time when customers are increasingly using their savings and running up big credit card bills to pay for regular expenses.
Since the beginning of the pandemic, automakers have struggled with a lack of microchips. Additionally, when raw material costs are rising, automakers are passing those expenses along to customers.
In addition, manufacturers are prioritising their most expensive vehicles owing to chip shortages, which is pushing some customers to purchase higher-end automobiles rather of the more moderately priced ones they might normally be comfortable with.
In the meantime, the used automobile industry has been under increasing pressure as a result of how expensive new cars have become. Used automobile prices increased 7.1% year over year in June.
Since prices appear to have peaked earlier this year, there is a significant likelihood that used vehicles will become more cost-effective in 2023. But if the chip shortfall is not resolved, new cars may continue to be pricey.
The fact that Americans may be readjusting to the idea of using public transportation, though, could be helpful. Demand for cars increased during the epidemic as people tried to avoid crowded trains and buses for fear of contracting COVID-19 and getting sick.
Many people are already settling into a "living beside COVID" pattern, which requires re-depending on public transportation. If enough people choose that way, it might reduce the demand for cars, which might have an effect on prices to some extent.
In 2023, those wishing to purchase a car may need to increase their finances, particularly if they plan to buy a brand-new car. Based on the current state of affairs, we shouldn't count on any significant progress during the first half of 2023, even though car costs may begin to gradually decline as the year goes on.