Amid recent concerns about inflation in the economy, the market for new and used vehicles is one of the sectors that has drawn the most attention. With the global economy still facing ongoing supply chain challenges — particularly a shortage of semiconductor chips needed for computer systems in modern vehicles — fewer new cars are hitting the market, which has raised demand for pre-owned vehicles. Additionally, rapidly rising gas prices in recent weeks has boosted demand for more fuel-efficient vehicles.
The result has been higher prices for both new and used cars. According to recent data from the Bureau of Labor Statistics, the prices for new vehicles rose 12.4 percent from February 2021 to February 2022, while used cars and trucks saw price increases of 41.2 percent last year—one of the largest increases of any category in the Consumer Price Index.
The recent spike in vehicle prices stands out in part because the price for cars has otherwise shown a slow rate of growth in recent years. From 1997 to 2020, per capita annual spending on vehicle purchases rose from $930 to $1,399, which averages out to a 1.8 percent annualized increase — a figure in line with normal levels of inflation.
But rising vehicle prices recently are worrying for vehicle owners because other costs associated with owning a car have grown more rapidly over time. Costs to operate a vehicle, like gas, maintenance, and parts, grew 84.1 percent — about 2.8 percent per year — from $1,166 in 1997 to $2,147 in 2019, before falling in 2020 with the onset of the pandemic.