Friday, 21 January 2022 10:52

Sticker Shock a Real Thing for Car Shoppers Right Now: Here's Why

Written by Jamie L. LaReau, Detroit Free Press
The used car lot at Golling Toyota in Warren, MI, on Jan. 13. The used car lot at Golling Toyota in Warren, MI, on Jan. 13. Kimberly P. Mitchell/Detroit Free Press


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The price to buy a new or used car is increasing at a faster rate than the average wage growth in the nation, a study said.

On Jan. 20, Anderson Economic Group, an East Lansing, MI-based economic consulting firm, released the results of a recent analysis comparing new and used vehicle price increases against wage growth in the U.S. private sector. The study relied on data from the U.S. Bureau of Labor Statistics related to the Consumer Price Index to compare the cost of a new and used vehicle relative to average weekly earnings for private jobs.


It found the average new car price last year increased by 11.8% in December compared with a year earlier. The average price of a used vehicle increased by 37.3% for the same period, according to Consumer Price Index data cited in the study.


But the average weekly earnings for all private jobs in the U.S. increased by 4.9% to $1,085.42 in December 2021 compared with $1,034.75 in the year-earlier period.


"These are some of the most extraordinary changes in the affordability of vehicles in recent history," said Patrick Anderson, CEO of Anderson Economic Group. "It is the first time 'sticker shock' has been a clinical condition for auto shoppers."


By that, Anderson means, customers are actually shocked by the high price of cars, he said.


The new and used car price hikes are the result of ongoing tight inventory caused by production disruptions across all automakers. The industry had to pause or stop new-car production throughout last year due to a global shortage of semiconductor chips used in a variety of car parts.


Dealerships saw their new-car lots become barren, and with fewer new cars to sell, there were fewer trade-ins of used cars, creating a shortage of inventory for both.


Yet consumer demand for new and used cars remains strong, allowing many car dealers to...

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