Car prices are ascending at a rate exceeding wage growth, according to recent research findings. - Car costs rapidly increasing at a higher rate than income growth, reveals study
Article
Germany witnesses a decline in new car affordability over the past five years, according to a recent study. Conducted by Oliver Wyman, a consulting firm, and Jato Dynamics, market researchers, the analysis found that the gap between net incomes and new car prices has significantly widened between 2019 and 2024.
Average annual net incomes in Germany increased by approximately 24% during this period, climbing from around €26,100 to nearly €32,400. In contrast, the average price of a new car rose more significantly, jumping from approximately €30,200 to nearly €41,800. This substantial increase in car prices has led to a decrease in affordability, with a person in Germany now required to pay an average of 1.29 annual incomes for a new car, compared to 1.16 in 2019.
The study attributes the majority of the price increase to the shift towards electric powertrains, combined with factors such as inflation and economic conditions. The availability of affordable entry-level models has also decreased, causing consumers to opt for financing, leasing offers, or cheaper used cars. New car purchases in Germany decreased by 22% over the study's period.
However, the high price of new cars may not tell the entire story. While electric cars may currently be more expensive than comparable internal combustion engine vehicles, they can be more cost-effective in the long run, according to a recent review by the Fraunhofer Institute for Systems and Innovation Research (ISI).
The prices of used cars in Germany have seen significant growth, with used electric cars reaching around €30,460 by February 2025. This strong demand for used vehicles might make them more accessible to consumers due to generally lower prices compared to new cars.
In conclusion, the affordability of new cars in Germany has decreased over the past five years due to faster price growth outpacing income growth. Factors contributing to this trend include technological advancements, regulatory pressures, supply chain disruptions, and economic conditions. While used cars have emerged as a more affordable alternative, the long-term cost-effectiveness of electric cars cannot be disregarded.
The Community policy should consider addressing the affordability issue in new car purchases observed in Germany, as the increasing prices have led to a 22% decrease in new car purchases over the past five years. In the employment policy, companies within the industry, finance, transportation, and automotive sectors might need to offer more affordable entry-level models or financing options to cater to a wider range of consumers. On the other hand, the employment policy could also focus on promoting the long-term cost-effectiveness of electric cars to encourage their adoption among consumers, especially given the significant growth in the prices of used cars.
