April 20, 2024

Average Monthly Car Payments Are $733. They Could Rise With the UAW Strike.

  • The United Auto Workers went on strike on Friday after the union’s four-year contract expired.
  • The strike could impact car prices and the US economy.
  • The cost of a new car has increased since the pandemic slowed production. 

The auto workers strike against Detroit’s Big Three auto manufacturers — General Motors, Ford, and Stellantis, which owns Chrysler and Jeep — could hit consumers’ wallets if the work stoppage lasts long enough.

About 13,000 United Auto Workers members went on strike on Friday after the union’s four-year contract expired. Tentative agreements could not be reached between the union and automakers on Thursday evening due to disputes over pay, pensions, and work hours.

Among the workers’ demands are 40% pay increases, improved benefits, and a reduced workweek.

“This is our generation’s defining moment,” UAW President Shawn Fain said in a statement. “The money is there, the cause is righteous, the world is watching, and the UAW is ready to stand up.”

The UAW’s unprecedented approach to strike all three automakers simultaneously could impact the cost of financing a new car, which has already reached all-time highs.

An analysis by Edmunds.com showed that the average monthly new-car payments for the second quarter of 2023 reached $733. According to the report, that’s up from $678 in the same quarter of last year — an 8% increase.

The steep hike in car prices began with the COVID-19 pandemic, as factory shutdowns slowed production and, as a result, whittled down inventory at dealer lots.

Car deals have steadily returned, but monthly payments and loan interest rates remain high. The average annual percentage rate for car loans was 7.1% for Q2, the highest APR since the last quarter of 2007, Edmunds.com found.

High borrowing costs are partly a direct consequence of the Federal Reserve’s move to continue to raise interest rates in hopes of quelling inflation.

Now, experts say car prices could continue to rise — particularly from vehicles made by the Big Three — if there’s a prolonged strike.

A work stoppage would mean slowed factory production for popular US-made car brands, hobbling already-low inventories.

At the end of August, Ford, General Motors, and Stellantis had enough vehicles to last for 70 days, The Associated Press reported.

“We see risk of a UAW labor strike curtailing US vehicle production, potentially at all three Detroit automakers,” Deutsche Bank analysts said. “This could further reduce inventories and help boost pricing.”

The impacts will not be seen overnight, but they could be curtailed if the union and automakers quickly reach a contract.

However, Jim Farley, the CEO of Ford, seemed uncertain that an agreement could be reached soon, according to The New York Times.

“They are not negotiating in good faith if they are proposing deals that they know are going to crater our investments,” he told The Times.

Fain, UAW’s president, told CNBC that auto companies have not been willing to provide raises that keep up with inflation “on top of decades of falling wages.”

“Their proposals don’t reflect the massive profits that we generate for these companies,” Fain told CNBC hours before the strike began Friday midnight.

Spokespersons for UAW, Ford, General Motors, and Stellantis did not return a request for comment sent outside of working hours.

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