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Car sales continue to free fall

A Bank of America report shows that although the cost of vehicles has fallen since 2021, the increase in insurance prices and interest rates make owning a car more expensive today.



New data released in a Bank of America report shows that auto sales continue to decline, due in part to rising inflation and rising interest rates.

Even though the cost of new and used vehicles has fallen from its 2021 highs, the increase in insurance prices and interest rates make owning a car today more expensive than ever.

Bank of America Institute economists stated in a research note:

Bank of America internal data on auto loan originations suggests that overall car sales are flattening, likely due in part to these affordability issues. And a Bank of America proprietary survey finds that Americans feel as though vehicle maintenance and loans are two of the top five most difficult household expenses to afford.

Auto Affordability by Veronica Silveri

Rising cost of loans

The report states that although vehicle prices have remained the same (and fallen since 2021), the numbers of new loan openings for all types of vehicles (new and used cars and trucks) have fallen since 2021 and 2022.

The low demand in the category of these loans is influenced by the increase in interest rates. According to the study, the increase occurred in a greater proportion (four percentage points) for 48-, 60- and 72-month financing. This equates to about $100-higher monthly payments on a loan of roughly $51,000.

Insurance rates are also on the rise

The report states that "according to the Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) data, motor insurance prices jumped 22.6% YoY in April 2024. As discussed in a recent premiums may remain elevated, providing further tailwinds to vehicle affordability," and reveals that at the same time, comparing the current insurance cost data with the figures from the beginning of 2021, it is evident that prices have increased by around 50%.

Data from Bankrate also shows that in 2023, the national average price for auto insurance reached $2,314 annually (for full coverage). That amounts to about $193 a month.

Bankrate analyst Shannon Martin told Fox:

With car insurance, it's something that's been building up for a while now. ...Car insurance tends to be very reactionary, so in the past few years, the industry has experienced a lot of losses during a time when inflation has caused the cost of vehicle parts, different products and repair costs, to increase.