https://www.npr.org/2022/07/02/1109105779/monthly-car-payments-record-700
Cars have long had their own special place in America.
The wide open roads, the wind in your hair, the feeling of freedom when you drive. Cars have been celebrated in movies and eternalized in songs for evoking all that.
And right now, that feeling of freedom comes with a pretty hefty price tag. The average monthly car payment crossed $700 a month earlier this year, the highest on record, according to Cox Automotive/Moody's Analytics.
"I joke with people that every new car purchase is a luxury car purchase, I don't care what you're buying," says Ivan Drury, senior manager of insights at the car buying expert Edmunds.
However, cars aren't just a symbol of freedom.
In fact, they play an essential role in the economy. People rely on cars to get to work — 3 out of 4 Americans commute to work by car. Then there's school drop-offs, doctors appointments, grocery shopping and more.
And yet, for more and more Americans owning a car is becoming unaffordable.
"Unfortunately for the segment of the population that probably needs it the most, it's getting more and more out of reach," Drury notes.
Indeed, that high dollar figure doesn't even account for insurance or parking for those who have to pay for it. Not to mention gas prices that crossed $5 a gallon recently and are still hovering near these record levels.
There's also no end in sight in an era when interest rates are rising and the cost of borrowing will likely go up even more.
The primary reason cars have gotten so pricey can be traced back to the computer chip shortage that started during the pandemic.
When car sales dropped dramatically during the early parts of the lockdown, auto manufacturers slashed orders for the chips.
Around the same time, as schools and work went online, people bought additional laptops, iPads, TVs, video games and other electronic goods for their home. So chip manufacturers shifted their production to serve those companies.
This was soon followed by other big shifts in the economy. People started moving out of crowded cities into suburban locations, and suddenly demand for cars skyrocketed.
Auto manufacturers were caught flatfooted and unable to make enough cars because they didn't have enough microchips, which play a big role in today's cars, controlling everything from windows to the navigation screen to even passenger seat sensors.