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Car Prices Hit Record High

MoneyWise

Christian talk radio with Rob West

July 21, 2022

Gas prices are sky high right now, but it may not matter if you can’t afford to buy a car. Prices for new and used cars have hit record highs. We’ll talk about that today on MoneyWise. Just how bad are car prices these days? One way to tell is by the average monthly payments you now have to make to buy a vehicle. A new report by Cox Automotive and Moody's Analytics shows that monthly payments for new cars are now averaging $712 a month and that a median of over 41 weeks of income is now needed for the average new car purchase. The latest data from the Consumer Price Index shows that new car prices jumped 12. 6% in the last year. That, and rising interest rates continue to drive monthly payments to record highs. Kelly Blue Book is reporting that the average new car price in May was just over $47, 000. Incredibly, price hikes are even worse for used car prices. They’ve gone up more than 16% since last year. In addition to higher interest rates, another factor driving payments higher is the continued shortage of computer chips required in today’s vehicles. Analysts are predicting that the chip shortage probably won’t get worse but then again it’s not likely to get any better in the months ahead. The bottom line, analysts say, is that the rapid rise in prices for new and used cars is likely to tail off but due to a continued tight inventory they’re not expected to decline for the rest of 2022. So, what can you do about it? Well, obviously, if you can afford to wait to buy either a new or used car, do it. In a year, things may look different, but they’re not likely to be much worse. But if you need a vehicle, first make sure you have a hefty down payment. Ideally, you want to save enough after paying off a car loan to make an even bigger down payment. If you keep doing that, you’ll be able to pay cash and not finance the vehicle at all. You’ll save a trunk load of interest costs. Now, if you’re buying a new vehicle, there are certain fees that you may be able to negotiate your way out of, so look for these on the window sticker. ADVERTISING FEE: First is an advertising fee. The dealer may insist on charging you for it, but it should be listed on the vehicle in plain view. If they spring it on you when you’re signing papers, do your best to have it taken out. PREPARATION CHARGE: Here’s another one to look for, something called a dealer preparation charge. Theoretically, it would cover prepping the vehicle for display on the lot and finalizing the sale, but this cost should be included in the retail price of the car not an added fee. FABRIC PROTECTION: Next, you might see a fabric protection fee. Ask to have that one taken off. If you’re worried about staining the upholstery, just buy a few cans of Scotchgard and do it yourself. It’ll be a lot cheaper. PAINT PROTECTION: Another fee you should try to avoid paying is for paint protection. This is a urethane film put on the car, but you shouldn’t need it. Any rust that appears would be covered by the warranty. Instead of this protection, just ask for wax when you go through the car wash. VIN ETCHING: One more fee you shouldn’t pay when buying a new car: vehicle identification number etching. It’s true that this would make it more difficult for thieves to resell your car if it’s stolen, but you can do it yourself or take it to an auto repair shop and have it done much cheaper than the dealer would charge. USED CAR TIPS Now for some tips on buying a used car, assuming you already know the vehicle or vehicles that would work best for you. Go online to Kelley Blue Book or Edmunds. com. You can plug in a vehicle’s year, make, model and mileage to get an idea of what you should expect to pay. To find potential used vehicles, you can also go online and check AutoTrader, Craigslist, AutoList and CarMax. Once you find a vehicle you like and you’ve settled on a price, make that contingent on the car passing inspection. Take it to a trusted, independent mechanic for a thorough going over. But then also check the vehicle history at CarFax and AutoCheck. It may have been involved in an accident. On today’s program, Rob also answers listener questions: ● How should you manage a land trust? ● When does it make sense to convert traditional IRAs to Roth IRAs? ● When is it wise to invest in real estate vs investing more in the market?

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