To Make America Affordable, Start with Cars

The cost of a new car rose 1.5% in July from a year prior. (Frederic J. Brown / AFP / Getty Images)

About the authors: Henrietta L. Moore is the founder and director of the Institute for Global Prosperity at University College London. Arthur Kay is an urban designer, advisor and a board member of Transport for London and the Royal Academy of Engineering. They are co-authors of Roadkill*, a new book about the costs of car dependency.*

Cars have long been marketed to Americans as symbols of freedom. In reality, they are one of America’s most pervasive and effective financial traps.

A new car costs $48,800 on average. A used car goes for around $28,000. But that sticker price is just the opening bid: Insurance, fuel, maintenance, parking, and depreciation pile on. Add that all up over the course of many years, and the lifetime cost of car ownership in the U.S. now exceeds $760,000—a sum greater than many households spend on housing.

This burden isn’t distributed equally. One study found that while a millionaire might devote 13% of lifetime earnings to owning a Mercedes Benz, a low-wage worker would need to spend an extraordinary 69% of their earnings for the same car. Even for a more modest compact car, a working class person would have to spend 36% of their lifetime earnings.

The combined costs of housing and transportation busts standard measures of affordability. Housing is typically considered affordable if it consumes no more than 30% of one’s income—but add in transportation, and the burden often jumps above 40%. In Pittsburgh, housing alone consumes 22% of household income, but housing plus transport eats up 39%. In Chicago, that figure rises from 26% to 40%.

Quietly, cars are making the U.S. even more unaffordable. They tie up money that could otherwise be invested in appreciating assets. Instead, households pour capital into an asset guaranteed to decline in value. That insecurity compounds when layered on top of housing debt, creating a precarious double bind. That isn’t freedom. It’s entrapment.

In the early 20th century, cars were luxury goods for the wealthy. General Motors invented the car loan—the “buy now, pay later” scheme—in 1919. That single financial innovation helped create the modern middle-class driver and entrenched the car-industrial complex.

Today, the car loan is one of the most profitable financial instruments in the U.S. Roughly 80% of new cars and 35% of used cars are financed with loans. More than 100 million Americans carry car debt totaling $1.6 trillion. That is larger than the economies of Saudi Arabia, Turkey, or Switzerland.

Auto loans are a secret wealth killer: You are borrowing money to buy an asset that only loses value. It is perhaps not surprising that nearly half of all auto loans are underwater. This debt locks people into jobs they can’t leave and homes they can’t move from.

Yet, in a survey of four major U.S. metros, residents said they would need $11,000 a year to give up driving—well above the $9,000 annual cost of ownership. Why? Because cars aren’t just vehicles. They represent status, autonomy, security, and identity. Transport choices are about more than getting from point A to point B. They reflect values around family, work, success, and freedom.

Yet driving doesn’t bring about success or freedom if it keeps car owners in debt. If, after understanding the true costs, someone still chooses ownership, that may be freedom. But being forced into it by policy failure and a lack of alternatives doesn’t represent choice. It is coercion.

New models of transportation—on-demand rentals, digital micropayments, and same-day delivery—are starting to decouple transportation access from ownership. These systems reduce financial risk while providing the convenience people crave.

That is a good start. But to relieve cost-of-living pressures and reduce inequality, we need policies that make car ownership actually optional, including better public transit, smarter zoning, flexible insurance, and debt reform. True freedom of movement won’t come from another auto loan. It will come when Americans can choose mobility without being impoverished by it.

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