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The Real Reason Behind the Rise In Prices Of New Cars

Image Source: Prostock-studio / Shutterstock

It is reasonable to expect that car prices will increase over time due to reasons such as advances in technology, design and safety features. Today, sticker prices are significantly higher compared to, say, 20 years ago after adjusting for inflation. There is, however, an issue with sticking to this general assumption. The factors mentioned above alone do not fully explain why the prices of new cars have skyrocketed in recent times.

According to the U.S. Bureau of Labor Statistics’ Consumer Price Index Summary, transaction prices—what people actually paid for their vehicle—were up by over 12.2 percent for new cars in January 2022 compared to a year ago! That kind of increase cannot simply be chalked off to ‘technological advancements.’ No. It’s a lot more complicated than that. Here, we look at some of the reasons why consumers have to stretch their budgets more than ever before to afford a new vehicle.

The COVID-19 Pandemic

The rapid pace of technological advancements has also played its part in pulling along vehicle prices. Modern cars are stronger, safer and more efficient, thanks to the use of high-grade steel and other revolutionary materials. They are also packed with a seemingly endless array of features, from gesture control and highly sophisticated driver assistance wizardry to 360-degree cameras and power-operated liftgates.

Even the base vehicle trims come with enough tech ‘goodies’ that align with the average consumer’s expectations of a safe and pleasant drive. It all comes at a cost, though, one that’s reflected in the final purchase price of the vehicle.


Image Source: Prostock-studio / Shutterstock

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