Car prices persistently escalate subsequent increases
In Germany, the affordability of new cars has taken a significant hit over the past five years, with the gap between average net income and new car prices widening considerably. According to a study by Oliver Wyman and Jato Dynamics, this trend is largely due to a 40% increase in new car prices since 2019, while average net salaries rose by just 24% during the same period.
The shift towards more electric vehicles is mostly to blame for the price spike, accounting for almost half of the overall increase. Other factors contributing to the rise in prices include inflation and economic fluctuations. The decline in the availability of affordable entry-level models has further compounded the issue, causing more consumers to resort to financing, leasing offers, or second-hand cars. Consequently, new car purchases in Germany decreased by 22% between 2019 and 2024.
While the upfront cost of new electric cars is still typically higher than that of comparable internal combustion engine vehicles, they tend to be more cost-effective for owners over the long run. A research overview by the Fraunhofer Institute for Systems and Innovation Research (ISI) indicates that mid-range electric vehicles can already be more economical than their internal combustion engine counterparts, given typical usage and the ability to charge at home, after just three years. This is primarily due to lower energy and maintenance costs.
It is essential to note that rising car prices and the shift towards electric vehicles are interconnected. The higher production costs of electric vehicles, particularly for batteries, and the industry's emphasis on more high-end models, have limited the range of affordable new cars available for average consumers. Moreover, consumer reliance on government incentives, financing, and leasing options to offset the cost increase is becoming increasingly common.
In sum, the affordability of new cars in Germany has faced an significant challenge due to a combination of rising prices, reduced availability of entry-level models, and the industry’s shift towards high-end and electric vehicles. The frugal buyer may need to consider alternative options such as leasing, financing, or purchasing used vehicles as the market trend continues to evolve.
- In light of the steadily increasing prices of new cars in Germany, the financial aspect of owning a vehicle has become a significant concern, leading more consumers to consider alternatives like leasing, financing, or purchasing second-hand vehicles, as the cost of employment remains stagnant.
- As the automotive industry emphasizes high-end and electric vehicles, the community policy of promoting cleaner technology has inadvertently created a gap in the employment policy, as the production costs of such vehicles are higher, leading to the decline in the availability of affordable entry-level models for average consumers.
