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The war in Iran and other global factors have pushed U.S. energy costs higher: the nationwide average for a gallon of regular is about $4.10, up from roughly $3.19 a month earlier, with California averaging near $5.91 a gallon (up from about $4.73). Those fuel-price spikes are coming as the price of vehicles is already at record levels.
New-vehicle prices have climbed sharply — the average new car now costs more than $49,000. Overall, average transaction prices are more than 20% above pre‑pandemic levels and rose further after tariffs on vehicles and parts were imposed, adding to consumer cost pressures. Financing, insurance and ownership expenses have also increased, making the total cost of owning a new car higher than many buyers remember.
Several factors are driving higher vehicle prices:
– Consumer demand for larger, better‑equipped vehicles. Light trucks (SUVs and pickups) now account for roughly 80% of sales; their size and extra features raise production costs and lower fuel efficiency.
– New technology and features that buyers expect, which add to vehicle sticker prices.
– Supply‑chain constraints and trade policies that raised input costs for automakers.
At the New York Auto Show, electric vehicles dominated the exhibits, but EVs remain a small share of registrations — roughly 8% of new car registrations in the most recent year. Analysts say the industry may move toward alternate powertrains over time, but that does not necessarily imply an immediate return to smaller cars. Nick Yekikian of Edmunds notes buyers want space and capabilities, so automakers must balance efficiency and the features consumers demand.
Historically, energy shocks — notably the 1970s energy crises — pushed the market toward smaller, more fuel‑efficient models. Today’s market is different: larger vehicles are deeply entrenched, and the shift may be toward different propulsion systems (EVs, hybrids, etc.) rather than a broad small‑car comeback.
If new vehicles are out of reach, shoppers often turn to the used market: used cars can cost roughly half of comparable new models, making them a popular alternative for price‑conscious buyers as gas and vehicle prices remain elevated.