American Consumer Credit Counseling (ACCC) suggests shopping carefully for used vehicles, maintaining cars and keeping them longer, and using app-based car sharing services.
Boston, MA – February 17, 2023
The cost of driving in America may be at an all-time high between fuel prices, expensive maintenance, and staggeringly high sticker prices on new automobiles. American Consumer Credit Counseling, Inc (ACCC) is advising its clients and consumers nationwide on money-saving strategies as Presidents Day marks the traditional peak of the car-buying season.
Average monthly payments on new-car purchases have reached $777, according to Cox Automotive – which publishes the Kelley Blue Book guide to vehicle prices. Used car payments have hit an average of $544 per month. Sticker prices, meanwhile, have risen 30 percent since 2019 – to an average $50,000 for a new car, according to JPMorgan.
“For most American households, a motor vehicle is not a luxury. It’s a necessity for commuting to work, grocery shopping, and managing family travel for everything from vacations and holidays to school sports and other youth activities,” said Allen Amadin, President and CEO of American Consumer Credit Counseling, Inc. “Automakers and their dealers are keeping inventories low to control operating costs. That means sticker prices will remain high and probably go higher.”
The growth of the gig economy has also made reliable vehicles a necessity for many people who either supplement their income or generate all of their earnings by driving for companies such as Uber, Lyft, Door Dash, Instacart, and other app-based services. Yet the higher cost of new vehicles is creating real strain on household budgets.
According to Fitch Ratings, more Americans are falling behind on car payments than has been the case in years. Subprime auto loan borrowers who are at least two months behind on payments rose to 5.67 percent in December, according to Fitch. That’s the highest rate of such delinquencies since 2009.
With auto loans often representing the second highest monthly expense (behind housing) for many households, ACCC budget counselors are advising new clients every day on how to better manage vehicle expenses. Some tips and suggestions on alternatives to new car buying include:
- Hang on for the long haul – The most cost-effective strategy around new vehicles is not having to purchase one at all. The longer you can own and operate your existing car, the more value you are getting out of the original purchase you made. Regular maintenance such oil and lube changes, tune-ups, tire rotation, and winterizing are the best steps for extending a car’s life. You can also purchase third-party extended maintenance plans and coverage. But be sure to read the fine print and understand what exactly is covered for the monthly cost of such a plan.
- Perform a household automobile usage audit – Does your family really need two cars? Or three? Look closely at how each vehicle is used, how often and by whom. Chances are with some mild lifestyle adjustments you can downsize car ownership and even generate some cash by selling off an excess vehicle.
- Look again at the used car market – The peak pandemic years of 2020 through 2022 saw used car prices skyrocket because of a global shortage of computer chips necessary for the manufacture of new cars. Second-hand auto prices have started to come down and the supply of quality used vehicles is increasing. Cars that are one to five years old offer better value than a new car at sticker prices and monthly payments significantly lower than new vehicles. Much older “basic transportation” vehicles can be found at independent car lots and through private purchase, but it’s important to make sure such cars get a thorough check for mechanical and safety issues.
- Consider creative alternatives like car sharing apps – If your driving needs are limited and don’t involve daily commuting, you might best be served by using one or more car-share or other similar app-based services. Examples include Turo, Getaround, Flexcar and Zipcar.
“Not driving at all or shifting to an all-public transit routine is a major lifestyle change and not always possible or simply not desirable for many people. America is a car-driving society,” said Katie Ross, Executive Vice President of American Consumer Credit Counseling. “But not owning car no longer must mean not driving at all. These app-based services and other platforms for vehicle sharing can be effective and budget-friendly options.”
About American Consumer Credit Counseling
American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt management, bankruptcy counseling, housing counseling, student loan counseling, and financial education concerning debt solutions. To help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loan assistance, youth and money, homeownership, identity theft, senior living, and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). For more information or to access free financial education resources, log on to ConsumerCredit.com or visit http://www.consumercredit.com/financial-education.aspx