A new study reveals a cold, hard truth for new car buyers

Although some cities and metropolitan areas have robust public transportation systems that can reduce car dependence, most Americans commute to and from work, run errands, and transport their children using their personal vehicles.

While cars are essential to getting around this wonderful land and it’s imperative to have the latest and greatest in order to experience the latest in safety and comfort technology, it’s no secret that new car prices are as high as never.

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According to the most recent data available from Cox Automotive, the average list price for a new set of wheels in the United States in August 2024 is $46,841, with an average transaction price of $47,870 that month.

Although Cox points out that a third of new models on the market have list prices under $46,000, a new study from the auto-buying site Edmunds suggests that many buyers are looking at the new car market through rose-tinted glasses and they will be waiting. sticker shock case.

Vehicles for sale at a Honda dealer in Fremont, California, USA.

Bloomberg/Getty Images

Small budgets, high expectations

In a recent study by Edmunds, experts found a massive disconnect between new car buyers’ price expectations and the grim, expensive reality.

Some 48 percent of buyers surveyed in August 2024 told the car-buying site they expect to spend no more than $35,000 on their new rides, while 14 percent said their budgets are $20,000 or more small.

Although the latest Cox data shows new car prices are out of league for most buyers, Edmunds found that in the most recent data available there were virtually no transactions where buyers took home a vehicle for less than $20,000.

Edmunds made an interesting observation: The average age of a car turned in for a new trade-in is about six years, meaning the last time the average car buyer went through the measures was 2018.

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Edmunds also notes that “a lot has changed for car shoppers” since 2018. Back then, automakers were battling the auto glut with lots of incentives, rebates and low interest rates. Additionally, the average car transaction was around $35,000.

This outdated mindset, which buyers reflect, is also evident in the financing department. About 75 percent of shoppers surveyed said the highest acceptable interest rate for a new vehicle purchase was between 0.1 percent and 6 percent. However, in today’s world, data shows that most buyers finance 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 percent of shoppers surveyed by Edmunds said they’ve held off on buying a new car because of high prices, and some are holding off on some pretty big events and expenses to afford that new set of wheels.

Some 54% of respondents say they plan to work more hours or take on a second or third job to afford their next car, while 29% are holding off on vacation, 11% are holding off on buying a house, 15% deferred from the base. monthly needs, and 5% stop medical procedures.

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