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Why are Car Prices So Expensive Right Now?

The global pandemic has caused many problems, one of which has been the rise in car prices. You might have noticed that purchasing a new car has become more expensive, and this trend is not just limited to one country or region. So what’s behind this sudden increase in car prices? This article will take a closer look into the reasons for the hike in car prices.

Pandemic-Induced Industry Slowdown

As the world was hit with the COVID-19 pandemic, many automakers were forced to shut down operations to ensure the safety of employees. This caused a huge backlog of orders for new cars, leading to a significant scarcity of supply. When demand is higher than supply, prices tend to go up. Moreover, the manufacturers of car parts, such as semiconductors, experienced delays due to the pandemic, causing a bottleneck effect across the automotive supply chain. This led to a shortage of key components, such as computer chips, that are essential to making cars functional.

Increase in Demand for Cars

While the pandemic may have caused a temporary decrease in demand for cars, factors such as low-interest rates, more people moving to suburban areas, and a desire for private transportation over public transportation ultimately led to an increase in car purchases. Additionally, a shortage of used cars during the pandemic also led many consumers to opt for new cars, causing an increase in demand.

Rising Raw Material Costs

Another factor that can’t be ignored is the rising cost of raw materials. As economies reopened, the demand for materials like steel, aluminum, and copper increased. This, in turn, raised the prices of production for automakers, which they then passed on to the consumers.

U.S. Tariffs on Imported Vehicles and Materials

In 2018, the United States imposed tariffs on imported vehicles, parts, and raw materials, including steel and aluminum. The tariffs were meant to protect domestic industries, but ultimately led to an increase in prices for imported cars and car parts. The tariff also motivated domestic manufacturers to raise prices due to reduced competition.


The pandemic, increase in demand, rising raw material costs, and U.S. tariffs have all contributed to the rise in car prices. Unfortunately, it is difficult to predict when this trend will end. However, the best way to deal with the situation is to plan your purchase accordingly and be flexible. You might be able to score a good deal by choosing a less popular make and model or waiting for a deal. With a little patience and foresight, you can still get your dream car at a reasonable price.