• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

High costs push car owners to the edge

High vehicle costs along with elevated interest rates have pushed many car buyers to the edge.

The average price for a new vehicle in November was $48,247, according to Kelley Blue Book.

Meanwhile, the typical interest rate on a new car loan was 10.33% while the typical monthly payment was $766, as of November 2023, according to Cox Automotive.

Aleena might be fortunate to be paying slightly less than these figures — even on a lease she acquired with bad credit rather than a loan — but if you take a close look you will find a growing number of car owners are paying more than $1,000 a month for their wheels. A record 17.5% of consumers who financed a new vehicle were paying more than this amount in the third quarter of 2023, Edmunds data shows.

Over 100 million Americans have auto loans, according to the Consumer Financial Protection Bureau, so the scale of this crisis is truly national. The total debt burden of cars is $1.6 trillion, Federal Reserve Bank of New York data shows — equivalent to the student loan crisis.

The debt burden is already too much for some borrowers. According to data from Fitch Ratings, 6% of subprime borrowers were more than 60 days late on their car loans as of October. In September, this rate hit a record 6.11%.

Discover the power of FreeCash – your ticket to easy money

Dive into a world of rewards at FreeCash where earning cash is as simple as a click. No gimmicks, just real cash for your time. Join the community of earners today and watch your wallet grow effortlessly.

Make Money Now

Boosting income while avoiding ‘lifestyle creep’

Besides a car loan, Aleena also has credit card debt and a student loan. However, she saw a big jump in income after getting a job as an infectious disease physician in 2022. Now, she makes $300,000 a year, pre-tax, plus bonuses.

In Connecticut, the threshold for the top five percent of income earners is $336,800, according to SmartAsset. Aleena’s total compensation, including bonuses, could be somewhere near that threshold.

Hammer says Aleena is “the highest income we’ve had on this show.”

Simply put, she has the opportunity to mitigate her debt, unlike most average income earners. However, to do this Aleena needs to change her spending habits and avoid “lifestyle creep” — the temptation to spend more when you earn more.

Sponsored

This 2 Minute Move Could Knock $500/Year off Your Car Insurance in 2024

Saving money on car insurance with BestMoney is a simple way to reduce your expenses. You’ll often get the same, or even better, insurance for less than what you’re paying right now.

There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.