If you’re in the market for a car, you may be feeling like prices are rising no matter which direction you turn.
Recent data shows new vehicles are now averaging around $50,000 for a base model, up roughly 12.6 percent from last year. At the same time, used car prices are also climbing, creating a squeeze for consumers.
Economist Walter Lane says there are a few key factors driving the trend.
One of the biggest reasons on the new car side is technology.
“Base models today come equipped with a wide range of features,” Lane said. “Navigation, Bluetooth, in-cabin Wi-Fi, cameras,even if you don’t subscribe to additional services, the vehicle is built to support them, and that adds to the cost.”
Another major factor is tariffs, which impact both vehicles and the parts used to build them.
“We import a significant number of cars and components,” Lane said. “When those are taxed, that cost ultimately gets passed on to the buyer.”
He also points to lingering effects from the COVID-19 pandemic and industry shutdowns, which continue to influence supply chains and pricing.
While those factors largely affect new vehicles, the used car market is feeling the impact as well.
“Used cars tend to follow the new car market,” Lane said. “When people are priced out of buying new, they shift to used vehicles, and that increased demand drives prices up.”
Despite the higher costs, Lane says there are still opportunities for buyers to save.
“If you’re looking for a new car, the time just before the next model year rollout can be ideal,” he said. “Dealers are often trying to move remaining inventory from the previous year, and those vehicles are still new.”
Looking ahead, Lane says relief may be on the horizon particularly for electric vehicles.
“The cost of electric vehicles is expected to come more in line with gas-powered base models within the next five years,” he said. “That could open up more options for consumers.”
For now, though, buyers may need to plan carefully and shop strategically as prices remain elevated across the board.
