How Much Is The Average Cost Of Car Insurance

How Much Is The Average Cost Of Car Insurance – If you guessed the average price of a new car today, what would you do? I think it’s worth $23,000 because my Honda Fit is sweet for a budget car and it’s only $19,600 new. Being frugal, it seems logical to leave a 20% reserve for price increases. Too bad I’m far away!

According to valuation analysts at Kelley Blue Book, the average transaction price for a light vehicle in the United States in 2021 will be $37,876. Dear! In 2020, the average price of a new car is almost $38,000.

How Much Is The Average Cost Of Car Insurance

How Much Is The Average Cost Of Car Insurance

It gets worse. According to Edmunds.com, the average price of a new car in 2021 will be more than $39,950. This is crazy! The average price of a new car has risen in part due to production shutdowns and supply chain problems during the global pandemic.

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For 2022, the average price of a new car will definitely be more than $40,000. With inflation hovering above 8.5% and ongoing supply chain issues, the cost of new cars will continue to rise. Fortunately, used car prices are finally coming down in 2022 after rising since the start of the pandemic.

We could all be rich because I don’t know many people with a median household income of $68,000 who can afford the average price of a new car.

Interestingly, the average price of used cars has also increased. Due to the pandemic, more people are buying used cars and using public transport less.

Check out the most popular car brands and models on the market today and their prices below. Data comes from Kelly Blue Book to give an average car price of $37,876 for 2020. Also in 2022, the average price of a new car is more than $40,000.

The Year Old Used Cars Selling For More Than What They Cost New

It’s ridiculous that the average price of a new car is $37,876 according to Kelly Blue Book. But, who am I to deny millions of data points? So many people reading 401k charts by age do this when they are off track. He went into denial.

I accept the reason the average price of a new car is high today is because demand is high and the average American is very wealthy! Forget the Great Recession and the pandemic. The economy is booming and people have money to spend. If people don’t have cash, prices will go down instead of going up to astronomical levels.

Below is a chart showing the average new car price of $39,950 and the average used car price of $23,169 in 2021. Primarily due to inflation and constant innovation, the average new car price continues to rise.

How Much Is The Average Cost Of Car Insurance

This is an even more surprising statistic. The average price of a used car is even higher! Due to supply chain issues, the pandemic and increased demand, there are not enough cars to meet demand.

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You can literally lease or buy a car for three years and even get a 40% increase in the price of a used car.

If all new car buyers followed the 1/10 rule, they would all make ~$400,000 a year. But I still have a lot to do to convince people not to flush so much money down the toilet, even though Financial Samurai has been around since 2009.

With many people from public transit janitors to 26-year-old programmers to food bloggers making $250,000+ a year these days, $190,000 a year can’t be too far for the average new car buyer.

The stock market is in a bull market. Meanwhile, real estate prices have returned to pre-crisis levels, and then in some cities such as San Francisco, LA and New York City.

Auto Insurance Cost Phoenix 2020

Spending more than 20% of your gross salary on a car when you can make mega bucks is irrational. No one I know would choose to have a new car because they could retire years earlier.

Also, those who don’t make $190,000 a year will only buy cheap used cars. I have done this for all but one of the previous cars I have owned. We all know that cars are one of the biggest obstacles to financial independence.

So it is clear that all new car buyers earn about $190,000 per year. Used car buyers get less money because cars depreciate quickly.

How Much Is The Average Cost Of Car Insurance

Check out the chart below. Over five years, a $30,000 car is worth about $12,000 with average depreciation. Therefore, we can assume that the average $12,000 car buyer earns ~$60,000 per year, which is very close to the average household income today.

Annual Cost Of Car Ownership Tops $10,000 Mark

Unfortunately, most new car buyers probably don’t make $190,000 a year. I know this because the average car loan is currently $30,032!

Holy hell. Who goes out and buys a car for $38,000 and then borrows $30,032? Are consumers really being financially irresponsible? Borrowing a lot of money to buy a depreciating asset is the best way to ruin your finances. At least when you borrow money to buy a home, the home has the potential to appreciate in the long run.

The last hope for America is that maybe the $30,032 loan can be repaid in a short period of time, like 1-2 years. Not. The average car loan term is 68 months (5.7 years) – the longest average term! If you think about it, the average monthly car loan payment is $503, for a total payment of $34,204 over 5.7 years.

The $30,032 borrowed for the car is now worth ~$50,293 over 10 years. This is based on a 5.3% annual growth rate if you invest in the S&P 500. Using a 7.2% growth rate for the S&P 500, $30,032 invested will turn into $60,140 in 10 years. Opportunity Cost is a car buyer’s worst enemy.

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Even if the borrower decided to invest an average monthly car loan of $503 in the S&P 500 for 68 months, he would have more than $40,000 invested because 68 X $503 = $34,204.

Is it any wonder why people who are thrifty or follow the 1/10 rule when buying a car spend more than those who lack financial discipline? In 10 years, a $34,000 car will be worth less than $10,000 on a roughly 70% depreciation schedule. A $30,000 investor, however, can have an investment worth 5-6X more!

If you invested $30,000 in real estate or the stock market 5 years ago, you would have $52,870 today

How Much Is The Average Cost Of Car Insurance

It still boggles the mind that the average net price of a car in the new decade will be about $38,000. As someone who drove a used $8,000 Land Rover Discovery for 10 years and a newer $20,000 Honda Fit, the average new car price of $40,000 is hard to fathom.

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Undeterred, I continued to look for the reason for such a high average price of a new car when I came across a SF Bentley dealer and a new $235,000 MSRP, $250,000, well equipped Bentayga SUV.

I have been told by car dealers that they can not keep in stock because there is too much demand. The same applies to partners in Ferrari, Lamborghini, Mercedes, BMW and Maserati dealers.

In other words, forget about the top 1% who can barely afford a $250,000 vehicle. The super rich are getting richer because of the raging bull market!

The top 0.1% turned more funny money into real assets before it all went down like the last recession. The super rich also saw people like George Michael die at 53 with a mega million. As a result, he told himself to live while he still could.

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So someone has it. The super rich and middle class who don’t read Financial Samurai spend like there’s no tomorrow. The super rich don’t care about rising interest rates. They pay cash or rent a vehicle as a business expense.

The middle class doesn’t care about spending a lot on a new car because they don’t know anything about it. Eventually the middle class will be crushed again, but for now, let’s have a good time!

If you own a business, you may want to consider purchasing an SUV or heavy-duty truck to cut costs. This is one way that the typical American owner can reduce the cost of a new car.

How Much Is The Average Cost Of Car Insurance

Instead of spending money on the average price of a new car, invest in real estate instead. Real estate is my favorite way to achieve financial freedom. These are tangible assets that are less volatile, provide utility and generate income.

How Car Rentals Explain The 2021 Economy

The easiest way to invest in real estate is through public REITs, private REITs, or real estate syndicates. Check out my two favorite real estate crowdfunding platforms. They can register and explore for free:

Fundrise: A way for accredited and non-accredited investors to develop real estate through private eREITs. Fundrise has been around since 2012 and counting

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