Cost of buying, insuring new cars rises due to inflation, reports say

Consumers spent more money in August on buying new cars and insuring them due to high inflation, according to recent reports.

The average price paid for a new vehicle in the U.S. in August increased to $48,301, topping the previous high of $48,080 that was set in July, according to Kelley Blue Book.

And not only did consumers pay more for their cars — financing them became more expensive as well. Cox Automotive/Moody's Analytics' Vehicle Affordability Index showed that interest rates on auto loans increased by 37 basis points from July to August.

Driving costs are up due to high inflation and supply chain issues, the index said. 

Insurance costs also rose 1.3% in August, according to the latest Consumer Price Index (CPI). And U.S. households are spending on average an extra 5% more on buying and insuring cars when compared to last year, a recent doxoINSIGHTS report showed.

"New-vehicle affordability in August was much worse than a year ago when prices were lower, incentives were higher, and rates were much lower," the Cox Automotive/Moody's Analytics report said. "The estimated number of weeks of median income needed to purchase the average new vehicle in August was up 14% from last year."

If you are looking for ways to lower your auto costs, you could consider switching your insurance coverage provider. Visit Credible to find your personalized car insurance quote without affecting your credit score.

CONSUMERS EXPECT INFLATION TO DROP SIGNIFICANTLY BY NEXT YEAR, NEW YORK FED SURVEY SAYS

Why auto insurance costs increased

The average U.S. household is spending nearly $200 a month on auto insurance, up from $186 a month last year, according to doxoINSIGHTS. 

Part of why consumers are paying more for insurance is because inflation has driven up loss costs for insurers. Increased vehicle costs mean insurers are paying more for auto repairs and replacements and passing those expenses onto consumers.

"The last few years created a bit of a perfect storm to increase the cost of car ownership across the category," Jim Kreyenhagen, vice president of marketing and consumer services at doxo, said. "Driving went back to pre-pandemic rates, and so did the accidents and insurance rates associated with it, just as the cost of buying a car and buying gas were both on the rise."

If you are looking for ways to lower your auto insurance premiums, you could consider switching your provider. Visit Credible to compare multiple insurance companies at once and choose the best coverage option for you.

 INFLATION IMPROVES SLIGHTLY IN AUGUST FOR SECOND CONSECUTIVE MONTH — WHAT IT MEANS FOR YOU

Used car prices decreasing

There are some signs that inflation is improving in the used vehicle market. Cox Automotive's Manheim Used Vehicle Value Index — which measures the prices that dealerships pay for used cars at auctions — fell 2.3% in the first half of September from August.

The average listing price of used vehicles also dipped to $31,302 in July, a 4.6% decrease or $1,526 less than the average list price in January, according to automotive research firm, Edmunds. 

"Although these price drops are not earth-shattering, they should be a welcome reprieve for consumers compared to the continued higher cost of new car purchases or leases," Jessica Caldwell, Edmunds' executive director of insights, said.

Comparing multiple insurance quotes can potentially save you hundreds of dollars per year. You can get a free quote in minutes through the Credible marketplace.

HOW MUCH WILL MY INSURANCE GO UP AFTER A SPEEDING TICKET?

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.