You’ve been toying with the idea of buying a new car for a while and are planning to finally go to a dealership and make the purchase. But wait — this might not be the best financial decision right now. Read on to find out why.
New vehicle prices have risen sharply during the pandemic. One of the reasons is that the pandemic caused disruptions in supply chains, leaving automakers with less-essential parts (like computer chips) and much smaller inventory. Other supply chain issues that have impacted vehicles throughout the pandemic include auto factory closures, congested shipping ports and trucking/haulage labor shortages.
A broken supply chain and reduced inventory levels inevitably mean sellers will raise prices to make up for their losses. So if you’re planning on getting a new vehicle from your local dealership, expect to walk in and get sticker shock.
You might think that a used car would be a more financially savvy choice right now – unfortunately, that’s not true.
As the pandemic has reduced the supply of new vehicles and increased prices, more buyers are turning to used cars as a solution. This has created a hot seller market where people will outbid each other and pay well over the asking price to get the sale. According to the consumer price indexprices for used vehicles and trucks have increased by 41.2% over the past 12 months. By comparison, new car prices increased by just 12.4%.
Another expense that should make you reconsider your vehicle plans right now is gas. Gasoline costs have skyrocketed of late, and drivers across the country are feeling their finances take a hit every time they fill up their cars. From March, the average price of gasoline was over $4 – and diesel was over $5. The data from the US Energy Information Administration on retail gasoline prices from 1993 to 2022 shows how dramatic the current price jump is.
Budgeting for a vehicle
If you’re still considering buying a vehicle after these price jumps, you should review your budget to see if you can actually handle the commitment.
First you should see if you can afford the initial purchase. Then you should also make sure you can manage regular post-purchase costs (gas, insurance, maintenance) and emergency expenses. You can prepare for emergency expenses by signing up for roadside assistance through your auto insurance and setting up an emergency fund. These safety nets will alleviate the emotional and financial stress of car problems like flat tires, stalled engines and collisions.
If you don’t have an emergency fund or roadside assistance and need to pay for a tow truck or car repair right away, you can turn to a loan for help. You could load the transactions onto your credit card and pay the balance later. Or you could try applying for an online loan and see if you get approved for it.
When looking for online loans, look for those that are available in your home state. So if you live in New Orleans, look for Online loans in Louisiana These loans may be accessible to you. You don’t want to waste your energy applying for options that aren’t available at all in Louisiana.
Buying a vehicle is now more than ever a major financial commitment. Check if your budget can handle it.