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For years, working-class American families have had trouble buying homes, the most basic symbol of the American dream. Now though, they’re even having trouble buying a car, another symbol of the free American spirit. David Welch and Keith Naughton report in Bloomberg:
A shiny new car in the driveway has been an emblem of middle-class prosperity for generations. But for the typical American family, it’s now a distant dream.
The average monthly payment for a new car has soared to a record $777, nearly doubling from late 2019, according to Kelley Blue Book owner Cox Automotive. That’s almost a sixth of the median after-tax income for US households. Even used models have climbed to $544 a month on average.
The sticker shock extends well beyond the US, where inflation is a thorny political issue for President Joe Biden as the 2024 election looms. In Europe, prices are flirting with records. Used-car prices soared in Japan last year, and in China, a rapid push to electric vehicles means consumers will have to pay more in some cities.
At the root of the problem is automakers’ new mantra: Keep inventory lean and price tags fat. Three years after the pandemic triggered a global shortage of semiconductor chips and crippled car manufacturing, Ford Motor Co., General Motors Co. and their overseas rivals are notching big profits. Even as the chip crunch shows signs of easing, they’re pledging to keep production in check.
And because electric vehicles cost about 25% more than the average car, the shift to plug-ins is about to make the affordability crisis even worse. Add soaring interest rates to the mix, and new cars — like home ownership and a college education — are fast becoming the domain of the rich.
“The idea of a new car in every American’s driveway is not the world we live in,” said Charlie Chesbrough, a senior economist at Cox.
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