Car Ownership Becomes a Luxury for More Americans as Costs Surge

A new study reveals that owning a car is increasingly becoming a financial burden for many Americans. Nearly four in ten, or 39%, of those surveyed by LendingTree say a car is a luxury they cannot afford.

The primary drivers are rising fixed costs: loan payments averaging $7,275 annually, insurance at $2,277, gas at $2,105, and maintenance at $1,184. Insurance costs have surged 37.5% since 2021, far outpacing income growth.

Many households are spending 15% of their income on car-related expenses, matching the threshold for being transportation cost-burdened. In Louisiana, the strain is highest at 23.2% of income. Massachusetts had the lowest strain at 10.6%.

To adapt, Americans are delaying purchases and committing to longer loans-sometimes seven years-to make monthly payments affordable. However, this can lead to greater interest costs and the risk of being upside down on the loan. Gen Zers are particularly affected, with 27% delaying a car purchase.

"Costs tied to car ownership continue to rise faster than incomes," said Matt Schulz, LendingTree chief consumer finance analyst. "It leaves many households with very little room for error."