- Nearly a quarter (23%) of Americans who purchased a car in the past six to eight months regret their purchase.
- Nearly one-third (32%) of respondents without a car say they need a car, but cannot afford one right now.
- Almost half (45%) of respondents who don’t have a car right now but need one say not having a car is holding them back financially.
For many Americans, driving a car is a key part of everyday life, whether that be for commuting to and from work, transporting kids to school or weekly grocery runs. For most, it’s not a luxury to own a car, it’s a necessity. Yet, in today’s market, purchasing, or even owning a car is far from affordable with supply chain issues and inflation causing vehicle and gas prices to skyrocket.
According to a study by Qualtrics on behalf of Credit Karma, one-third of respondents who are not car owners say they need a car but cannot afford one in today’s market. What’s more concerning is that nearly half (45%) of respondents who don’t have cars feel that not owning a car is holding them back from making financial progress (i.e. not being able to easily commute to work), while 12% say owning a car is too big of a financial obligation.
Yet, vehicle dependency grew during the pandemic
In the midst of the COVID-19 pandemic, many Americans became more reliant on their cars. In fact, a majority of respondents (58%) who are car owners say the pandemic made them more reliant on having a car.
This dependency is real. According to the study 42% of respondents are currently in the market for a car, with more than half (55%) saying they are willing to pay over budget to purchase a car in the near future. What’s more concerning is, in order to finance a car, nearly one in five (19%) plan to take out a personal loan or pay using a credit card (18%) — both high-interest payment options that could result in unmanageable debt given more than half of respondents are willing to take on $15,000 or more in debt to finance their vehicle.
Here’s a breakdown of how much debt those in the market for a car are willing to take on to purchase a car:
|$10,000 or less||22%|
|$10,000 to $14,999||14%|
|$15,000 to $24,999||16%|
|$25,000 to $34,999||12%|
|$35,000 to $44,999||9%|
|$45,000 to $54,999||7%|
|$55,000 or more||8%|
Car buying proceeded, but not without a cost, or regret, in some cases
Skyrocketing car prices and limited inventory did not steer consumers away from purchasing a car. In fact, 81% of respondents who own a car obtained a car in the past six to eight months. Of those, more than half (54%) purchased a used car and nearly half (46%) purchased a new car.
While half (51%) of recent car buyers say they had a positive car buying experience overall, not everyone’s experience has been so rosy. According to the study, 22% of respondents who obtained a car in the last 6-8 months had to change their spending habits and cut down on social activities to afford a car while 14% went into debt and 13% had to pull from emergency savings. What’s more, 11% had to sacrifice necessities, including bills, rent and groceries to purchase a car, and another 11% are stuck with a high-interest auto loan.
Of respondents (14%) who went into debt to purchase their car in the past six to eight months, here’s a breakdown of how much debt they took on to finance the car:
|$10,000 or less||19%|
|$10,000 to $14,999||15%|
|$15,000 to $24,999||22%|
|$25,000 to $34,999||21%|
|$35,000 to $44,99||8%|
|$45,000 to $54,999||9%|
|$55,000 or more||5%|
Nearly a quarter (23%) of respondents who purchased a car in the past six to eight months say they regret their purchase. Here’s why:
|Buying a car set me back financially||33%|
|I am struggling to make ends meet with my monthly car payments||32%|
|I am having to sacrifice necessities to manage my car payments each month (i.e. bills, rent, groceries)||29%|
|I had to pull from an emergency savings account to purchase my car||26%|
|I didn’t shop around for the best auto loan and am unhappy with the terms of my loan (ie. paying high interest on the loan)||21%|
|I didn’t understand the full cost of owning a car (e.g. loan payments, insurance, gas prices, maintenance, etc.)||21%|
|I didn’t get to purchase the car I wanted due to price or inventory||19%|
However, a majority (77%) of respondents who purchased a car in the last six to eight months say they do not regret purchasing their car. The reason? 36% say having a car enables them to travel to see family and friends more easily, 34% say they’re now able to get to and from work, and 31% say they feel safer commuting. Additionally, more than a quarter (26%) of respondents who purchased a car in the past six to eight months say they were able to trade in their current car for a new one making it more affordable and another 22% say they were able to save money during the pandemic making it possible for them to afford a car.
Speaking of savings, prospective car buyers are flush with cash
Many Americans were able to build their savings throughout the pandemic. This could be why 41% of respondents who are in the market for a car plan to pay for it in all cash. On the flipside, many car owners have seen the value of their car increase throughout the pandemic. In fact, more than half (53%) of respondents who own a car say they’ve considered selling or trading in their car given the rise in car values this past year.
Car financing struggles
While a large majority (93%) of respondents who obtained a car in the past six to eight months and financed with an auto loan are making monthly payments, more than half (53%) say they feel stressed about their monthly car payment obligations. Of those who financed their recent car purchase with an auto loan, more than a quarter (28%) say they obtained a long-term auto loan so they could make smaller monthly payments, 16% say they have missed or been late on paying other bills and loans to be able to make their monthly auto loan payment and 13% say they have missed or been late on at least one monthly auto loan payment.
Car prices are rising as demand for cars goes up, making it more important than ever for consumers to do their due diligence when it comes to shopping around for an auto loan with good terms. Yet, of the majority (60%) of respondents who bought a car in the past six to eight months and financed their car with an auto loan, more than one-third (36%) did not shop around and chose the first loan presented to them, while 37% did not try and negotiate the terms of their auto loan. When you consider that nearly half (48%) of these respondents obtained their auto loan through the dealership, it’s likely they could have ended up paying higher interest and fees since it’s not uncommon for dealers to raise the interest or tack on fees to compensate for their handling of the financing.
“For many Americans, a vehicle is one of the most costly assets they purchase and maintain,” said Rory Joyce, GM of Credit Karma Autos. “With the pandemic making car ownership a priority for many, it’s important for consumers to understand the full cost of owning a car today, which includes market-driven factors such as high car and gas prices, as well as monthly loan payments, auto insurance and maintenance and repair costs. If you’re a current vehicle owner and need a new car now, consider trading in your vehicle to mitigate cost as your current car has likely appreciated in value, and no matter what your financial situation might be, it’s good practice to shop around for insurance and a loan, and try to negotiate fair terms for your auto loan.”
On behalf of Credit Karma, Qualtrics conducted a nationally representative online survey in November 2021 among 1,214 American adults, aged 18 and above, to gauge how prospective and recent car buyers are faring in today’s car market.