why are car prices so high

[OChristian]

Car prices are high due to a fundamental imbalance between supply and demand, largely caused by persistent global supply chain disruptions. While the extreme chip shortages of 2021 have eased, the auto industry is still catching up. This is compounded by high inflation, increased production costs for complex new technology, and sustained consumer demand.

The shortage of semiconductors, critical components for everything from infotainment screens to engine management, forced automakers to prioritize high-margin vehicles like trucks and SUVs. This constrained the supply of new cars, leading to intense competition and fewer discounts. Even as chip production recovers, building a vehicle involves thousands of parts, and bottlenecks elsewhere continue to cause delays.

Manufacturers are also investing heavily in electric vehicle (EV) development and advanced driver-assistance systems (ADAS). These technologies are expensive to engineer and produce. To maintain profitability while managing these costs, companies often focus on producing well-equipped, higher-priced trims. Additionally, labor costs, raw material prices for steel and aluminum, and rising logistics expenses have all contributed to higher Manufacturer's Suggested Retail Prices (MSRPs).

The used car market is directly tied to the new car market. With fewer people trading in vehicles due to longer ownership cycles and high new car prices, the supply of quality used cars remains tight, keeping their values abnormally high.

Factor	Impact on Price	Example/Data
Microchip Shortage	Reduced new car production, leading to low inventory and high demand.	Global auto production lost over 11 million vehicles in 2021.
Rising Raw Material Costs	Increased cost of steel, aluminum, and rare earth metals for EV batteries.	Lithium prices (key for EV batteries) increased over 500% in 2021-2022.
Increased Feature Content	Standard inclusion of advanced technology (safety, infotainment) raises base price.	A 2023 mid-size SUV now includes ADAS features that were luxury options 5 years ago.
High Consumer Demand	Strong demand, fueled by savings and need for personal transport, supports high pricing.	New vehicle average transaction price peaked near $48,000 in late 2022.
Inflation & Labor Costs	General increase in the cost of doing business, from wages to transportation.	U.S. consumer inflation reached a 40-year high in 2022.

Ultimately, while some market pressures are easing, a return to the steep pre-pandemic discounts is unlikely as the industry's cost structure and product focus have permanently shifted.

[AnnieLee]

It feels like a perfect storm. We wanted new cars after staying put, but the factories couldn't build them fast enough because of computer chip shortages. That meant fewer cars on lots, so dealers had no reason to offer deals. They could sell every vehicle at or above the sticker price. Plus, everything from the metal to ship the car costs more now. My old sedan is worth a fortune, but trading up is still a huge financial jump.

[LydiaDella]

The core issue is the massive integration of technology. Modern vehicles are rolling computers, requiring complex semiconductors. The supply chain for these chips is incredibly fragile. A disruption overseas halts production here. Automakers, facing these shortages, logically prioritized building their most profitable vehicles—fully loaded trucks and SUVs—further reducing the supply of affordable models. The high cost of developing electric powertrains and sophisticated software also gets baked into the price of every new car, pushing the baseline cost upward.

[McEllie]

From a practical standpoint, your best move is to be flexible. If a specific new model is too expensive, look for a comparable one from a different brand that might have better inventory. Consider a certified pre-owned (CPO) vehicle; they're newer used cars with factory warranties, often in great condition. Broaden your search area beyond your local dealers. And most importantly, get pre-approved for a loan from your bank or credit union before you walk into the dealership. This gives you a firm budget and negotiating power.

[JaxonLee]

I look at it as a long-term trend, not a temporary spike. The auto industry is in a costly transition to electrification. Billions in R&D for EVs and batteries are being passed on to consumers. Furthermore, consumer expectations for technology—large touchscreens, subscription services, and autonomous driving features—have skyrocketed. Building these complex, software-defined vehicles is simply more expensive. While supply chain issues will resolve, this shift to tech-heavy transportation means a higher baseline price for personal mobility is the new normal.