Wealthy households are increasingly supporting the automotive market as high vehicle prices and elevated interest rates squeeze buyers with tighter budgets, according to a report by Cox Automotive.
Cox Automotive Data Shows Wealthiest Households Hold 82 Percent of Liquid Assets
The top ten percent of households now hold 82 percent of financial wealth outside of retirement accounts, according to data from Cox Automotive. That figure rose from 75 percent before the COVID-19 pandemic. Chief economist Jeremy Robb states that these holdings include deposits, money market funds, bonds, stocks, and investment funds. Over a seven-year period, these specific asset holdings grew by 11.3 percent.
Salary alone no longer tells the complete story of car purchasing power. Buyers who benefit from stock market gains and investment returns can afford to purchase vehicles with cash, shielding themselves from current borrowing costs.
Prime Used Car Loan Interest Rates Average 12.9 Percent
For the rest of the market, purchasing a vehicle involves significantly higher financing hurdles. According to the Cox Automotive report released on October 19, prime interest rates for used car loans averaged 12.9 percent, marking a 37-basis-point increase compared to September.
Total interest costs over the life of a typical used car loan have climbed from approximately $5,600 in 2019 to nearly $11,000. Interest payments now account for roughly 26 percent of total vehicle financing costs, compared to about 19 percent previously.
Running a vehicle also grew more expensive through rising maintenance expenses. Data for September shows that workshop costs for repairs and routine service increased by 5.8 percent year-over-year. Meanwhile, insurance premiums decreased by about five percent, though that drop fails to offset the broader surge in vehicle ownership expenses.
Used car buyers turning to older models find no relief from high prices. Cox Automotive data indicates that vehicles aged eight to ten years old increased in price by nearly ten percent compared to the previous year. While total vehicle sales continue, households operating on limited budgets face shrinking accessibility across the market.
Frequently Asked Questions About Car Prices and Interest Rates
Why are used car loan interest rates climbing while inflation cools?
Total interest payments now make up about 26 percent of a loan’s total cost over its lifetime, up from 19 percent in 2019.
How much have older vehicle prices increased?
Vehicles between eight and ten years old increased in price by nearly ten percent year-over-year, according to Cox Automotive analytics.
Which financial assets are included in the wealth concentration figures?
The wealth measured by Cox Automotive includes cash deposits, money market funds, bonds, stocks, and investment funds held strictly outside of traditional retirement accounts.
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