According to CNBC and June's consumer price index, Motor vehicle repair prices have increased by about 20% in the past year. This significant rise is more than six times the national inflation rate and represents one of the largest annual price increases for any household good or service.

The key factors contributing to this trend are both pandemic-era dynamics and long-term trends in the auto market. Here's a closer look at some of the reasons behind the surge in car repair costs:

1. More Technology in Cars: Modern vehicles are equipped with advanced driver-assistance systems and electronic sensors, making them like computers on wheels. Fixing this sophisticated technology requires higher costs, precision, and time for auto body work.
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2. Ongoing Supply-Chain Issues: The pandemic has caused supply-chain disruptions, leading to shortages of certain components like microchips. These supply-chain issues have made it tougher and pricier to replace parts during repairs.
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3. Longer Vehicle Ownership: Cars on the road have become older on average, resulting in a higher likelihood of major repairs being necessary. Pandemic-related shortages for auto parts further contributed to the rise in average vehicle age.
4. More Car Crashes: The prevalence of car crashes surged during the pandemic era, leading to greater demand for mechanics and subsequently raising prices for car repairs.
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5. Fewer Auto Repair Technicians: The automotive industry has faced a shortage of available mechanics to meet the increased demand, leading to higher labor costs for repairs.
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6. High-Tech Service Appointments: Many repair shops, especially at dealerships, have adopted high-tech service appointments, sharing photos and videos of potential problems with customers. While this service enhances transparency, it may also increase the average repair cost.

To proactively prepare for potential car repairs, we recommend setting up a "sinking fund." A sinking fund is a separate savings account dedicated to covering specific future expenses, like car repairs. By contributing regularly to this fund, you'll be better equipped to handle unexpected repair costs without derailing your financial goals.

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If you need assistance setting up a sinking fund for car repair costs or another financial goal, schedule a Coaching Check-In where we can open a new high yield savings account and automate your contribution based on the type of vehicle you own.