January 17, 2024
Car Buying is Tougher and Pricier Than Ever, and Total Cost of Ownership is Driving Car and Insurance Buying Trends
Car buying used to be simpler. You'd visit a dealership, pick a model, and drive away with your new ride. But today, it's tougher, pricier, and more complex than ever before. What's behind this shift in the car buying landscape? It's the Total Cost of Ownership (TCO), and it's the driving force behind car and insurance buying trends.
The average annual cost of ownership is up more than 13 percent from last year to more than $12,000, or just over $1,000 a month, according to the latest research from the automobile owners group, AAA.* And according to the Federal Reserve, the rejection rate for auto loans increased to 11% this year, more than twice 2022’s rate of 5.2%. This is the highest rejection rate since the start of the series in 2013.**
When you consider buying a car, what's the first thing that comes to mind? For many, it's the sticker price on the car's windshield. While that number can be a significant factor, it's just the tip of the iceberg. The TCO concept encompasses everything from the initial purchase price to fuel costs, maintenance, insurance, and even depreciation. In other words, it's the grand total of what your car will cost you over its lifetime.
For today's car buyers, understanding the TCO has become more critical than ever. It's no longer enough to know the upfront cost. With the rising costs of fuel, insurance, and maintenance, buyers want to know the full financial picture. It's about making informed decisions and ensuring that the car fits comfortably into their budget.
Car buyers are not just looking for a car: They are considering the entire financial commitment, including insurance. 84% cite overall cost as an important attribute when buying a car with 63% naming the cost of insurance specifically.*** Dealers who recognize this evolving dynamic and who can help provide solutions that address these concerns will gain a competitive edge.
This finding puts insurance on par with other crucial factors, like the latest car technology (which only 55% named)****. It underscores a shifting trend where affordability and practicality are taking center stage in the car buying process.
The TCO approach is about looking beyond the glitz and glamour of the showroom and delving into the long-term financial commitment of car ownership. As car prices continue to rise, understanding the TCO has become a strategic move for buyers. It's about making smart choices that align with both your desires and your budget.
In conclusion, the modern car buying landscape is more challenging than ever, but it's also brimming with opportunities for savvy buyers. Understanding the Total Cost of Ownership is the key to navigating this complex journey. It's about looking beyond the initial price tag and considering the long-term costs that come with car ownership. As TCO gains prominence, it's driving a shift in car and insurance buying trends, putting affordability and practicality front and center.
Download the full 2024 Polly Embedded Auto Insurance Study, and stay tuned for more insights into the evolving world of car buying and insurance.
