You’ve been mulling over the idea of buying a new car for a while now, and you’re planning on finally going to a dealership and making the purchase. But wait—this might not be the best financial decision right now. Read ahead to find out why.
Prices of new vehicles have surged over the course of the pandemic. One of the reasons for this is that the pandemic caused disruptions in supply chains, leaving automakers with fewer essential parts (like computer chips) and a much smaller inventory to work with. Other supply chain problems that have affected vehicles throughout the pandemic are auto factory shutdowns, congested shipping ports, and worker shortages in trucking/transportation.
A disrupted supply chain and smaller inventory inevitably lead sellers to raise prices to compensate 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.
So, you might be thinking that a used vehicle would be a more financially-savvy choice right now—unfortunately, that’s not true.
Since the pandemic reduced the supply of new vehicles and raised the prices, more buyers have turned toward used vehicles as a solution. This has created a hot seller’s market, where people are scrambling to outbid each other and paying well above the asking price to get the sale. According to the Consumer Price Index, the prices of used vehicles and trucks rose by 41.2% in the past 12 months. In comparison, the prices of new vehicles only rose by 12.4%.
Another expense that should make you rethink your vehicle plans at the moment is gasoline. The cost of gasoline has skyrocketed recently, and drivers all across the country are feeling their finances take a hit every time they fuel up their cars. As of March, the average price of gasoline was over $4 — and diesel was over $5. The U.S. Energy Information Administration’s data on retail gasoline prices from 1993 to 2022 show just how dramatic the current price jump is.
Budgeting for a Vehicle
If you’re still considering buying a vehicle, even after seeing these price surges, you should go through your budget to see whether you can actually handle the commitment.
First, you’ll want to see whether you can afford the initial purchase. Then, you’ll also want to make sure that you can manage the regular costs after the purchase (gasoline, insurance, maintenance) and emergency expenses. You can prepare for emergency expenses by signing up for roadside assistance through your auto insurance plan and setting up an emergency fund. These safety nets will ease 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 coverage, and you need to pay for a tow truck or auto repair immediately, you can turn to credit for help. You could put the transactions onto your credit card and then pay down the balance later on. Or you could try applying for an online loan and see whether you get approved for it.
When searching for online loans, look for ones 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 in Louisiana whatsoever.
Buying a vehicle is a huge financial commitment now more than ever. Check to see whether your budget can handle it.