Ending Soon! Save 33% on All Access

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. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick


There's Another Tax That Will Cost You In Big Ways If You Don't Do These 3 Things

Emotional tax is the interchange of energy and value. If you're depleted, this exchange of person or project is a cost. If you're energized and have received value, the exchange is a plus or profit. Learn three practical ways to kick overwhelm and lower your emotional tax for good.

Business News

Sam's Club Is Removing a Beloved Free Perk and Members Are Not Happy: 'No Benefits for the Cost'

Disgruntled Sam's Club members are complaining on social media about the new change, effective August 19.

Growing a Business

Why I Choose to Publicly Share My Startup's Business Data on LinkedIn — And Why You Should Do the Same.

Here's why I'm sharing my startup's business data on LinkedIn, what data specifically, and how it has benefited my startup – and could benefit your company, too.

Real Estate

3 Helpful Resources to Use When Searching for a Real Estate Investment Property

Find top websites for investment property searches. Understand the importance of location, property taxes and job markets for a successful investment.

Business News

How Much Does It Cost to Develop AI? The CEO of an $18 Billion AI Startup Reveals the Current Price.

There's a sky-high bar to creating AI, and an expert says it will get even more expensive.

Health & Wellness

These Rapidly Growing Non-Alcoholic Beverages May Encourage A Damp July

If you want fewer hangovers, better sleep, more energy and weight loss, minimize your alcohol intake this summer with these alternatives that still elevate your mood.