‘Average workers can’t afford new cars costing £40k apiece’
As inflation continues to rage, Mike Rutherford thinks a £40k-plus price tag for regular family cars is already certain
A typical new car at 20-25 grand is bit like a three-quid cappuccino in a cardboard cup, a £5 burger in a brown paper bag, a 20-quid ‘dinner’ for one at a modest restaurant, the hotel room for £100 a night, that 25-year mortgage costing £1,000 monthly.
I’m not talking here about premium, high-quality or classy purchases. Instead, they’re all basic, unglamorous and very real-world.
But, give or take a few pennies or pounds, millions of financially hard-pressed working Brits remain just about willing and able to pay the sort of prices quoted above. Think of these items as average goods and services bought by Mr & Mrs Average earning average (or thereabouts) wages.
But how would such a consumer react if the vehicle manufacturer upped the price of that comparatively humble, factory-fresh car to 40 or 50 grand? Similarly, what would customers do if that £3 coffee increased to £6? The takeaway burger jumped from a fiver to a tenner? ‘Dining’ for one at a pizzeria or wherever cost £40 instead of £20? Sleeping in a humble hotel room spiralled from £100 to £200 a night? Those £1,000 monthly mortgage payments (totalling £300,000 over 25 years) rocketed to £2,000 (£600,000)?
I’ll tell you what the reaction would be: regular people would have little choice but to be forced down the ‘can’t pay, won’t pay’ route. And at that game-changing moment, it’ll be largely game over for new-car showrooms, coffee shops, sandwich bars, family restaurants, modest hotels and financial institutions selling mortgages. Put simply, punters will be priced out.
In recent days, some basic supermini prices have quietly crept up to and beyond the psychologically important £20,000 mark for the first time. Yup, the little, entry-level VW Polo, for example, now costs in excess of £20,000 (and more like £25k after metallic paint, a couple of other options and interest charges). But such a small, unassuming runabout with obvious space limitations hardly qualifies as ‘the average car’ – which is larger, roomier, heavier, safer, with more grunt and likely to cost about twice as much.
American retail pricing guides and the Bureau of Labor/Labour Statistics first rang alarm bells when recently predicting the average new-car price would hit $49,388 (roughly £39,500) in early 2023. But the more powerful and influential giant that is Toyota North America has since gone further by warning the figure will exceed $50k.
What occurs in the USA one day often repeats itself in the UK the next, so average new-car prices here were, officially, over £39,000 in January. And as inflation continues to rage, £40k-plus is already certain, while circa-£50k is likely in a near future when cheaper petrol and diesel cars will be increasingly replaced by more – and more expensive – EVs.
Trouble is, salaries are nowhere near keeping pace. So, with the best will in the world, average workers on average wages just won’t have enough money for factory-fresh cars averaging £40k-£50k apiece. If/when that sad day comes, it’ll be the end of a new car-buying era for the working men and women of Britain. Shame. Great, great shame.
Do you agree with Mike? Let is know your thoughts in the comments section...
