By Chris McCahill
Ford’s Model T was a groundbreaking feat of mass production—cutting car costs by more than half over the course of a decade and spurring the massive rise in automobile use across the U.S. Those days seem far behind us, according to the latest reports. Transportation costs have risen by nearly 20% since 2022, as reported in the Wall Street Journal, and car insurance in some states could rise 50% by the end of the year.
There are plenty of factors at play, including vehicles getting larger and more expensive. New and used vehicle prices have increased by more than 20% since 2020. And larger vehicles cost more to fuel, despite gas prices dropping by around 30% over the past two years.
Insurance costs are also rising sharply. Insurify, a company that monitors and compares insurance prices, predicts the cost of a typical auto policy will jump 22% this year to an average annual premium of $2,469, following a 24% increase in 2023. This is not just because cars are becoming more expensive, but also because of increased damage from extreme weather.
They explain in their recent report:
“Insurer losses result from a combination of inflationary pressures — like the rising cost of vehicle repairs and the skyrocketing price of new cars — and unprecedented climate catastrophes that drive weather-related claims in states that haven’t historically seen as much of this type of damage.”
They predict that worsening storms and wildfires could push costs up by more than 50% in states like California, Missouri, and Minnesota. Hail-related claims accounted for 12% of all claims in 2023.
The burden of these rising costs will not fall evenly on American households. As we’ve written before, Black households pay around 35% more for car insurance, despite having fewer vehicles on average.
While climate policies designed to slow and mitigate the effects of climate change may offer some relief, our analysis indicates that most states still have significant progress to make. A comprehensive solution will likely involve families opting for smaller vehicles, coupled with transportation agencies implementing policies that let them own fewer vehicles and use them less often.
Photo Credit: Apoorv Ishan via Pexels, unmodified. License.