Why Are Cars So Expensive Lately?

Car Prices and Costs are Rising

It’s true, car prices are increasing at an alarming rate, often putting brand new vehicles and even relatively new used vehicles out of budget range for many automotive consumers.

When new car prices increase, so do used car prices.

So why are car prices and costs so high now?

New cars, like most other goods, are more expensive to build now than ever before. Materials, labor, distribution, marketing, and sales costs increase every year.

Contrary to popular belief, car dealers actually don’t have much built-in profit margin between invoice price and MSRP sticker price. As a result, dealers are forced to try to find other ways to make a profit to stay in business.

How dealers generate profit

One of the ways dealers generate additional profit is through what is called a “doc” fee, which is added to the cost of a car. It is made to sound like an official fee but is not. It’s typically in the range of $499-$699 for an average vehicle. It can sometimes be negotiated lower, or even out of a deal completely.

Another way to more profit is through add-on sales, usually sold by the Finance Manager as you’re ready to sign papers to close your deal.

He’ll try to sell you high-priced high-profit items such as paint sealant, maintenance contracts, credit insurance, security devices, extended warranties, and other products or services that you typically don’t need.

It’s generally wise to turn down the offers and keep your original car deal intact.

Financing rates are up

Although loan and lease finance rates are still relatively low at the time of this writing, they are on a slow rise. To get the lowest rates, customers must have good credit scores. You have 3 of them — three separate scores and reports from three major credit bureaus.

Get your FICO® Scores and 3-Bureau Report now for $39.95

Insurance costs are on the rise

Because cars are more expensive now, insurance cost rises every year as well. Repair and replacement costs are higher now. And because there are simply more cars on the road, probability of accidents increase.

Leasing has become more expensive

Although car lease payments are considerably lower than loan payments for the same vehicle, same term, the average lease cost is rising along with higher vehicle prices.

Leasing fees such as acquisition fee, lease-end disposition fee, damage fee, and excessive mileage fee have been steadily rising over the last few years.

To learn more about car leasing, see LeaseGuide.com.

Used cars are more expensive

As mentioned previously, used car price increases relate to new car price increases.

However, used vehicle prices can vary considerably depending on make, model, age, and mileage. And prices are often set by dealers based on supply and demand in a particular town or area.

You can find essentially the same used car at different dealers in the same area for significantly different prices. This is why shopping and comparing prices on used cars is so very important.

So what can you do?

Because the tide of car prices is rising, it requires automotive consumers to put more thought and effort into getting the lowest price possible when buying a new or used vehicle.

Compare Dealer Prices

One of the fastest and easiest ways to compare dealer prices on both new and used cars is through an online automotive web such as Edmunds.com where you can not only research your cars, but get multiple dealer price offers that already include any discounts or manufacturer incentives.

For used cars, see Edmunds Used Car Prices
at multiple dealers in your area.

Get the Best Finance Rate

Since both new-car and used-car loan finance rates are based on your credit score, it’s best that you know your score before you visit your dealer so that you are not surprised.

What’s your FICO® Score? Find out now with a purchase of your Experian Credit Report for $1 with a 7-day trial enrollment in Experian CreditWorksSM

Get the Lowest Cost Insurance

Again, the best way to get the lowest cost insurance in this world of rising insurance rates . . . . is to simply shop around and get rate quotes from different companies. Rates vary widely.

We recommend Esurance.com as one of the best online insurance companies. Rate quotes are fast, easy, and free. Start with them and get other quotes from other companies to compare.

If Buying a Used Car


In addition to shopping at multiple dealers using Edmunds.com (link above), and shopping for low insurance rates, you might also need to consider an extended warranty to protect you from expensive breakdowns and repairs. For that, we recommend not buying from a dealer but buy directly from a respected warranty company online to save a ton of money and get better service.

Free Extended Auto Warranty Quote – 30-day Money-Back Guarantee

If Your Credit is Not So Great

If you are buying a car and you already know you have less-than-perfect credit, you may need a loan from a lender who specializes in sub-prime loans to people with credit problems.

We recommend that you take a look at Auto Credit Express
if you find yourself in this situation. It’s fast easy, and you get results immediately.

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