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Forget Gas Prices -- Car Prices Have Reached Record Highs 'I joke with people that every new car purchase is a luxury car purchase, I don't care what you're buying.'

By Madeline Garfinkle

Opinions expressed by Entrepreneur contributors are their own.

It's never been more expensive to own a car.

Car payments have topped $700 a month according to Cox Automotive / Moody Analytics, with the cost of a new car reaching its highest record yet — an average of $47,000. And if you think used cars are the solution, think again. The cost of used cars has risen 16.1%, which is more than new cars (12.6%) compared to last year.

Related: With Used Car Prices Hitting All-Time Highs, is Now a Good Time to Buy KAR Auction Services?

"I joke with people that every new car purchase is a luxury car purchase, I don't care what you're buying," Ivan Drury, senior manager of insights at the car buying expert Edmunds, told NPR.

However, like in other markets, inflation is only partly to blame. The recent spike in car prices is due in part to a computer chip shortage that began during the pandemic. As people spent more time at home and less time commuting, automakers reduced their microchip orders, leading to a subsequent decline in chip production. However, now that people are returning to work, manufacturers are scrambling to get back to pre-pandemic production rates.

According to Automotive News, automakers across Europe and North America have cut more than 104,000 vehicles out of production plans due to chip shortages. The shortages have led automakers to produce fewer cars and utilize the available chips they do have for more advanced (and more expensive) models, which deprioritizes affordable vehicles.

"Unfortunately for the segment of the population that probably needs it the most, it's getting more and more out of reach," Drury said.

Related: Car Rental Prices Could Double by August Amid a Nationwide Shortage: Report

It's unclear if and when prices will begin to decline, but things are not looking up.

"Don't expect a lot of end-of-summer sales; there's really no inventory to clear out at this point — If you want to wait for prices to get better, it will probably be a while," says Jessica Caldwell, executive director of insights for Edmunds, per CNBC.

Madeline Garfinkle

News Writer

Madeline Garfinkle is a News Writer at Entrepreneur.com. She is a graduate from Syracuse University, and received an MFA from Columbia University. 

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