Average monthly car payments reach record high, topping $700

STREETSBORO, Ohio — On average, Americans are now paying a record-high amount for their monthly car payments. It’s the latest soaring cost associated with rising inflation, interest rates and supply chain disruptions.

According to a report from Cox Automotive and Moody’s Analytics, the typical monthly car payments hit $712 in May.

The companies’ vehicle affordability index shows a median household income would need more than 41 weeks’ pay to afford the average new car in May. The figure is up 19% from last year.

Kelley Blue Book research found new vehicle prices averaged $47,148 in May, which is the second-highest price on record.

“We’re a family that doesn’t want to take on too much debt and that’s a large bill,” said Jennifer Niemann. “I really feel for single moms and people who have to think about [family costs] versus not getting a new car.”

When Niemann and her husband purchased their car in March 2021, they found the selection was limited.

“We would have loved to have just picked out the perfect car, but we were willing to just say, ‘Good enough.’ And we were just happy to have a new car in that time period,” she said.

However, the couple is grateful they bought their car in 2021 because a year later, there is still limited inventory and prices are soaring.

U.S. Bureau of Labor Statistics (BLS) data shows new car prices have risen 12.6% compared to a year ago, while used car prices are up 16.1%.

“We were seeing increased pricing and increased cost for automobile ownership, much earlier than the issues we’re facing today…with interest rates going up and fuel prices going up,” said Lou Vitantonio, the President of the Greater Cleveland Automobile Dealers’ Association (GCADA).

He explained early pandemic shutdowns reduced labor and manufacturing, which in turn affected the industry’s supply.

“It’s not like the old days where you just show up at the dealership, they’re going to have 75 of the vehicles you’re looking at, you can pick one and drive off the lot,” he said.

Dealerships like Great Lakes Hyundai in Streetsboro are seeing low inventory at the same time demand is surging for both new and used vehicles.

“I think that’s been the biggest change – is a lot of the cars are pre-sold before they even come to the dealers’ lots,” said General Manager Bill Cooke about the challenges of the current supply and demand.

Prior to the pandemic, Cooke explained the car lot stocked 200-300 new cars and around 150 used cars at a time. More recently, the store’s inventory includes about 90 used cars and fewer than 15 new cars.

He said inventory has started to pick up in recent months as global supply chain disruptions are beginning to be resolved, adding customers can still order many of the cars and amenities they desire but may have to wait 6-8 weeks for the manufacturer to fulfill orders.

Economists are watching for signs of recession, but some say supply chain issues are easing and the recent drop in fuel prices could create savings elsewhere.

Head to our Gas Prices page to see the current cheapest gas prices in our area, as well as the average cost of gas statewide and historical gas price charts.

“A recession may be looming, but I think that there’s optimism – generally speaking – that over the long-term, things will even out for consumers,” said Michael Goldber, an Associate Professor of Design and Innovation at the Case Western Reserve University’s School of Management.

Vitantonio recommends considering leasing options, calling dealerships to check inventory ahead of time and tempering expectations about what you want in a new vehicle.

“You have to say, ‘Hey, I’ll give up the sunroof to have a new vehicle now’ or put in an order knowing, as long as you can wait, you know that timeframe,” he said. “It’s all based on what your budget is and what your needs are.”

According to Kelley Blue Book, the greatest demand for vehicles is for trucks and SUVs.

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