Owning a car is becoming more difficult as the rising costs of vehicles and insurance make ownership a luxury for more Americans, a new study finds.
Nearly four in 10 Americans surveyed by Lending Tree, or 39%, said a car is a luxury they cannot afford
And more car owners say they are stretched too thin with their costs, the study said. Rising fixed costs, especially in loan payments and insurance, are the main reasons people cited for why car ownership has become so expensive and elusive. Loan payments average $7,275 annually with insurance averaging $2,277, gas $2,105 and maintenance coming in at $1,184.
Insurance costs have surged 37.5% since 2021, outpacing income growth (23.9%) and other vehicle expenses, Lending Tree said. Consumers are taking on too much car-related debt A long-held rule of thumb is a monthly auto payment shouldn’t exceed 10% of monthly income and that your overall auto-related expenses shouldn’t top 20% of your income, said Matt Schulz, Lending Tree chief consumer finance analyst. But many people are topping the 20% threshold with their car payment alone, which is troubling, he said. “Costs tied to car ownership continue to rise faster than incomes,” and insurance premiums are also outpacing income growth, Schulz told USA TODAY. “When those rising costs are combined with high loan payments and everyday financial pressures, it leaves many households with very little room for error.” Many Americans with active auto loans are spending 15% of their income on car-related expenses, which equates to $12,841 annually against a median household income of $85,759, Lending Tree said.