Why Car Prices Are So High Today

Rami Sneineh, vice president at Insurance Navy Brokers, points out that the semiconductor shortage during the pandemic severely hampered the production of new vehicles, making a recovery difficult.

“Even when factory capacity returned, the skyrocketing costs of labor and materials helped raise sticker prices even higher than they were in the pre-pandemic era,” Sneineh explains.

Mandated technology, high interest rates and demand for larger and more advanced vehicles have also contributed to steeper new car prices.

“There is an increased tendency toward bigger cars like SUVs and trucks, which are inclined to be more expensive than smaller cars, raising the average cost of purchases,” Sneineh continues.^[6]

How Used Car Prices Have Changed

Eager to save money on a pre-owned set of wheels? KBB indicates that the average used car right now has a list price of $25,945.^[7]

What Car Buyers Need to Think About

It’s smart to be well prepared before heading to a dealership or meeting with a used car seller. That means:

• Determining your budget and what you can afford
• Thinking carefully about the type of car you want to purchase and how long you plan to own it
• And learning if your credit is worthy enough to qualify for a better rate and terms if you need financing.

“High car prices combined with higher interest rates mean you’ll likely face larger monthly payments. With an average new car loan rate around 7% today, and a typical term close to 69 months, affordability is often stretched thin,” says Fix, who adds that financing a $50,000 car at 7% over 60 months will result in a car loan payment of around $1,000 per month – before adding insurance, taxes, and fees.

Additionally, ponder long-term fix and upkeep expenses based on your desired make and model. Per a Consumer Reports’ study of lowest repair and maintenance costs by brand, Tesla tops the list with approximately $4,035 in total 10-year maintenance expenses, followed by Buick and Toyota at about $4,900 each, and Lincoln at around $5,040. Mainstream mass-market brands like Ford, Chevrolet, Hyundai, Nissan, Mazda, and Honda also fall on the lower-cost end. In contrast, European luxury vehicles tend to be the most expensive: Land Rover can surpass $19,000 over 10 years, Porsche around $14,090, and Mercedes-Benz about $10,525.^[10]

“Remember, too, that the type of vehicle you choose affects your insurance costs,” Swanson adds. “Older, reliable and safe cars usually cost less to insure than newer luxury models or high-performance sports cars. But only part of your insurance rate is based on the vehicle itself. Your personal factors matter even more – things like your age, driving history and where you live play a major role in what you will ultimately pay for car insurance.”

Tips for saving money on a car purchase

Want to spend less on a new or used car? These expert-backed strategies can help cut costs:

• Shop beyond your zip code. Prices can vary widely by location, so expanding your search may unlock better deals.
• Time your purchase carefully. “Dealers are far more motivated to bargain in the last week of any month or quarter,” says Fix.^[7]
• Ask about incentives. Look for manufacturer rebates, special financing, or loyalty discounts.
• Avoid expensive extras. “Optional dealer add-ons, especially cosmetic packages and extended warranties, can be extremely expensive,” warns Sneineh.^[8]
• Buy slightly used. “The sweet spot is a three-year-old car, preferably a former lease,” says personal finance expert Paul Walker.^[10]
• Check the vehicle history. A low-cost report can reveal prior accidents or serious damage.
• Size and trim matter. Choosing a smaller vehicle or mid-level trim can lower both purchase price and ownership costs.
• Get preapproved financing. Credit unions and online lenders often offer better rates than dealer financing.
• Avoid long loan terms. Shorter loans usually cost more per month but reduce total interest paid.
• Do the math on EVs. Higher upfront and insurance costs may offset fuel savings.
• Consider certified pre-owned or off-lease vehicles. These options can significantly reduce monthly payments with minimal compromise.
• Negotiate the out-the-door price. Focus on the total cost, including taxes and fees, not just the monthly payment.
• Be ready to walk away. If the deal doesn’t feel right, leaving may be your strongest leverage.