Having a car is a luxury for some people. But for some people, it’s a must. If you need a car to get to work, for example, that cost is something you can’t avoid.
Having a car is a luxury for some people. But for some people, it’s a must. If you need a car to get to work, for example, that cost is something you can’t avoid.
Still, there is a difference between needing a vehicle that works and needing one that looks better. Suze Orman, a financial expert, says that if your car works fine now, you might want to think twice about upgrading.
It’s not good to buy a car right now.
In a recent podcast, Orman told people not to buy a car right now if they can help it. What’s up? She says that prices are so high that people are likely to pay a lot more for a new car.
Also, because the Federal Reserve has raised interest rates, it costs more to borrow money. So, consumers who buy and finance a car could end up going over their budgets, especially when the cost of auto insurance is taken into account.
How bad have prices gotten for cars?
New data from Kelley Blue Book shows that the average price of a new car sold in May was $47,148.
Last month, car prices went up by 1%, which is $472, compared to the month before. Compared to May 2021, they were also up 13.5%, or $5,613, on average.
In fact, the average price of a new car bought last month was the second highest ever. The only time people paid more on average for a new car was in December 2021, when the average price of a new car sale was $47,202.
When the cost of financing a car is added in, it’s clear that higher car prices also mean higher costs to own a car. Cox Automotive, a company that does market research, says that the average monthly car payment in the U.S. was $712 last month. That represents a record high.
Wait patiently for the right time.
If your current vehicle really isn’t safe or reliable to drive and you live someplace where having a car is a must, then you may have no choice but to purchase a car at a higher price and get stuck with a higher auto loan payment. But if you can wait, Orman would advise you very strongly to do so.
But just because you need a new car doesn’t mean you have to spend a lot of money on a new model. First, you could always buy a certified used car, which is usually much cheaper than buying a new car. And if that doesn’t work for you—for example, if you don’t feel comfortable driving a used car and want the warranties that usually come with buying a new one—be smart about the features you pay for in a new car.
You might like the idea of heated seats and a high-tech entertainment system. But if that makes your car $5,000 more expensive, you might not want to upgrade as much.
Since gas prices have gone up, it is now much more expensive to drive. Right now, the last thing you need is a big auto loan payment that will hurt your budget.
