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Writer's pictureDavid Peters

Navigating the Rising Costs of Car Ownership

We’ve all noticed it—cars are more expensive than ever. Whether you're in the market for a new vehicle or trying to keep your current one on the road, car ownership costs have increased significantly. But why is this happening, and how can you make smart financial decisions regarding your vehicle? Let’s break it down.



Why Are Cars So Expensive?

 

Several factors are driving up the cost of cars right now:

 

  1. Pandemic Supply Chain Shortages: The global supply chain is still feeling the effects of the COVID-19 pandemic, which has directly impacted the availability and price of new cars. Manufacturing delays, parts shortages, and logistical issues have all played a part in pushing prices higher.

 

  1. Rising Auto Insurance Costs: Car insurance premiums have skyrocketed in recent years. Insurers are dealing with increased claims and higher repair costs, which they pass on to consumers. This means that even if a car's sticker price hasn’t risen as much, your overall cost of ownership will still be higher because of insurance costs.

 

 

  1. Higher Interest Rates: The Federal Reserve has been raising interest rates to curb inflation, and auto loans are not immune. As a result, borrowing to buy a car is more expensive now than in years, making it harder for the average person to afford a vehicle.

 

Smart Financing Strategies

 

If you need to buy a car in this challenging environment, it’s essential to be strategic about financing. Many choose dealer financing for convenience, but this isn’t always the best deal. Before you sign on the dotted line, take the time to explore financing options through your bank or credit union.

 

Lenders offer different interest rates and terms and are worth shopping around. Also, consider the loan length—while longer loans offer lower monthly payments, they typically come with more interest paid over time. A little homework upfront can save you a lot of money in the long run.

 

Don’t Overlook Auto Insurance

 

Auto insurance is another area where you can potentially save. With rates climbing, it’s more important than ever to shop around. Many of us stick with the same insurance company for years, but switching providers could mean significant savings in such a competitive marketplace.

 

Remember, auto insurance is a state-mandated product so that every policy will cover the same essential elements, like liability and uninsured motorist coverage. Differences between policies usually come down to coverage levels and how claims are handled, not the quality of the policy itself. Take the time to get quotes from several providers, and don’t be afraid to switch if you find a better deal.

 

Consider Alternatives to Driving

 

Even if you aren’t buying a new car, the cost of maintaining and operating your current vehicle is on the rise. Gas prices, repair bills, and insurance premiums have all increased, meaning owning a car has never been more expensive. If you want to reduce your transportation costs, consider alternatives like public transportation, biking, or carpooling. These options can help your car last longer and save money on repairs and fuel.

 

Do Your Homework and Save

 

As I often tell my clients, when it comes to big purchases, the more you research and shop around, the better off you’ll be. Cars are no different. A larger down payment can reduce the amount you borrow, saving you hundreds or even thousands of dollars in interest over the life of your loan. And don’t forget to shop for services like auto insurance or maintenance providers. The more disciplined your approach, the more you can save.

 

Final Thoughts

 

Yes, cars are expensive right now, but that doesn’t mean you can’t make intelligent decisions to reduce the overall cost of ownership. You can minimize the impact on your wallet by being thoughtful about financing, shopping around for insurance, and exploring alternatives to driving. If you’re in the market for a new car or looking for ways to cut costs on your current vehicle, remember to do your homework and stay disciplined—your financial future will thank you.


Have questions or want personalized financial advice? Our team would love to talk. Request an appointment and we'll be in touch.


 

About the Author:

David Peters, CPA, CFP, ChFC, CLU, CPCU, CGMA, is the Founder and Owner of Peters Professional Education (petersprofessionaleducation.com) and Peters Tax Preparation & Consulting, PC. David Peters is also registered with the U.S. Securities and Exchange Commission (SEC) as an Investment Advisor Representative (IAR) with Peters Financial LLC. He regularly teaches courses in accounting, finance, insurance, financial planning, and ethics throughout the United States, and regularly contributes regularly to various professional publications, including NCACPA’s Interim Report, SCACPA’s CPA Report, and VSCPA’s Disclosures.


Required Disclosure:

The content presented above is for informational purposes only, is general in nature, and is not intended to and should not be relied upon or construed as financial, investment, or estate planning advice. This does not constitute an offer to sell or a solicitation to buy any security, investment or planning product. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. Please consult with a financial advisor to assess your individual situation.


Financial and investment advisory services offered through Peters Financial LLC. Brokerage and custodial services offered through Charles Schwab Co. Inc., member FINRA and SIPC. Peters Financial LLC and Charles Schwab Co. Inc. are not affiliated. David Peters also offers tax services through Peters Tax Preparation & Consulting, PC. Peters Tax Preparation & Consulting, PC is not affiliated with Peters Financial LLC and clients or prospective clients are never obligated to use Peters Tax Preparation & Consulting, PC. as part of any financial planning or investment management services offered by Peters Financial LLC.


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