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The average monthly vehicle payment for any kind of car or truck is now $691, according to data service Cox Automotive.
Consumers should spend no more than 10 percent of their net monthly pay on a vehicle, according to financial website Nerdwallet.
Under that guideline, car buyers would need to net $6,910 a month to afford to make monthly payments on a new car, which translates to a gross income of about $110,000 a year, Bloomberg calculated, well below the 2021 U.S. median household income of $67,463 reported by DQYDJ, a finance and investment website.
Only about a third of U.S. households make more than $100,000, qualifying them to buy a new car, according to market research firm IbisWorld.
However, most American households need two cars.
Therefore, a family able to afford two new vehicles would have to gross $220,000 or more a year, an income level at which only 10 percent of U.S. households reside.
Electric vehicles (EVs) currently are even more expensive than petrol-powered cars and trucks.
Tesla and Rivian, a maker of electric SUVs pickup trucks, raised their prices earlier this month, pegging Tesla’s cheapest model at $47,000, about the same price as Ford’s Mach-E. Cadillac has begun production of its electric Lyriq sedan, which carries a base price of $60,000.
Skyrocketing commodity costs are pushing up EV battery prices by “ridiculous” amounts, Li Xiang, CEO of China’s Li Motors, wrote on his Weibo social media account on 19 March.
Car makers are working to shrink EVs’ costs, largely by developing cheaper battery technologies, a saga we have tracked in articles such as “New Battery Could Double EV Range, Slash Charging Times” (15 Dec 2020) and “How and When Electric Vehicles Will Go Mainstream” (21 Sep 2021).
However, with inflation rising faster than wages and manufacturers’ costs of commodities—as well as a shortage of computer chips—the number of people able to afford these cars is shrinking.
GM has promised its Chevrolet Equinox and Blazer SUVs will be priced below $40,000 when they debut in 2024.
Also, vehicle companies are lobbying the government to continue tax credits for EV purchases, as much as $12,500 per vehicle.
TREND FORECAST: Given today’s rocketing cost of personal passenger vehicles, it is not surprising that the average convenience store customer drives a 12-year-old car worth around $15,000, according to a survey by convenience store chain owner Murphy USA that we reported in “Gas Station Owners Skeptical of EV Boom” (17 Aug 2021).
The ongoing shortage of computer chips and essential minerals and materials car makers need, especially for EVs, will hobble growth in the U.S. vehicle market and delay EVs’ long-anticipated arrival into the automotive mainstream.
China’s auto market will be less affected because the country has locked in greater supplies of crucial materials, either through domestic sources or by contracting with producing nations.