You’ve been thinking about buying a new car for a while and finally consider going to a dealership and making the purchase. But wait, that might not be the best financial decision right now. Read ahead to find out why.
New vehicle prices have surged during the pandemic. One reason is that the pandemic has caused disruptions in supply chains, leaving automakers with fewer critical parts (like computer chips) and much smaller inventory to work with. Other supply chain issues that have affected vehicles throughout the pandemic are auto plant closures, congested shipping ports, and trucking/transportation worker shortages.
A disrupted supply chain and reduced inventory inevitably leads sellers to raise prices to make up for their losses. So if you’re considering buying a new vehicle from your local dealership, expect to walk in and get sticker shock.
So you might be thinking that a used vehicle would be a smarter choice financially right now – unfortunately, that’s not true.
Since the pandemic reduced the supply of new vehicles and increased prices, more and more buyers have turned to used vehicles as a solution. This has created a hot seller’s market, where people are jostling to outbid and paying well above the asking price to secure the sale. According to Consumer price index, prices for used vehicles and trucks have risen 41.2% over the past 12 months. By comparison, prices for new vehicles rose only 12.4%.
Another expense that should make you rethink your vehicle plans right now is gasoline. Gasoline prices have skyrocketed recently, 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. US Energy Information Administration data on retail gasoline prices from 1993 to 2022 show just how dramatic the current price rise is.
Budget for a vehicle
If you’re still considering buying a vehicle, even after seeing these price spikes, you should review your budget to see if you can actually handle the commitment.
First, you’ll want to see if you can afford the initial purchase. Next, you’ll also want to make sure you can handle regular post-purchase expenses (gas, insurance, maintenance) and emergency expenses. You can prepare for emergency expenses by purchasing roadside assistance through your car insurance plan and building up an emergency fund. These safety nets will ease the emotional and financial stress of car problems like flat tires, stalling engines and collisions.
If you don’t have an emergency fund or roadside assistance coverage and need to pay for a tow truck or auto repair right away, you can turn to credit for help. You can put the transactions on your credit card and then pay off the balance later. Or you can try applying for a loan online and see if you are approved.
When researching loans online, look for those that are available in your home country. So if you live in New Orleans, search online loans in louisiana these loans may be available to you. You don’t want to waste your energy applying for options that aren’t available in Louisiana at all.
Buying a vehicle is more than ever a huge financial commitment. Check if your budget can support it.