The Effects of Cars on the Economy

Anyone who has purchased a new vehicle knows how important cars are to personal economics. Cars are among the most expensive purchases most people ever make, and the auto industry that creates them is a vital part of the American economy. The economic impact of cars is a complex series of small and large details, but the basic areas where automobiles harm, or help, the economy are not that difficult to understand.

One of the most visible impacts cars have on the economy is the creation of jobs at automakers and car dealers. Although American-based auto industry jobs have been on the decline for several decades now, thousands of Americans still make a living designing, building and selling cars. New plants owned by foreign automakers also create jobs in the communities where they are built. Transporting new cars to dealerships and marketing them to consumers are additional employment opportunities created by cars.

For the American car-buying public, cars represent a major purchase decision. A new car may cost the equivalent of a year's wages or more. Financing options and leases make cars more affordable to some buyers in the short term but make the process more complex. Along with rent or a mortgage payment, the monthly car payment figures prominently in the day-to-day finances of many drivers. At the same time, cars represent savings goals for many people and a car is a useful asset, especially if it is used as part of a small business and may be used as a tax-deductible expense.

Beyond the initial purchase, a car continues to cost its owner money and to have a broader economic impact. Cars require fuel, which itself constitutes a major expense. Regular maintenance and repair following an accident, along with car insurance, are both additional costs to the owner and opportunities for secondary businesses to thrive. Another example is the aftermarket auto accessory industry, which depends on customers who want to personalize or upgrade their cars, and employs thousands of people while making billions of dollars annually.

Much has been said recently about the environmental impact of cars. However, this is not entirely separate from the cars' economic effects. Cars that create more pollution—particularly older cars—may be more affordable, putting buyers in the middle of a decision between their budget and their environmentalism. Environmental clean-up efforts and initiatives to reduce the pollution caused by cars, such as tax breaks designed to provide incentives for drivers to buy more fuel-efficient cars, cost millions of dollars with hopes of saving even more money in the future.