American drivers can't catch a break on car insurance rates

If cruising the highway is an American birthright, it's also become an expensive one.

The cost of owning and operating a car has skyrocketed in the aftermath of the pandemic. And just as one element of car ownership has gotten more affordable, another is now wrecking the budget.

The latest pinch for drivers is the cost of auto insurance, which is up 20.6% year over year as of February — the biggest jump in the cost of car insurance in government data going back to 1985. It's also the biggest price jump for February in the 28 categories Yahoo Finance has been tracking since 2021.

Car insurance doesn't get nearly as much attention as headline items such as food, gasoline, and rent.

Yet it's now one of the few spending categories keeping the overall rate of inflation stubbornly high.

Overall inflation is down sharply from the peak of 9% in June 2022. But it ticked upward from 3.1% in January to 3.2% in February, causing fears that inflation may not be on the way out, after all.

Car insurance accounts for 2.5% of the basket of goods and services the government measures when calculating the overall rate of inflation and is among categories counted towards the "core" inflation measure — which strips out food and energy — that the Federal Reserve keeps a close eye on. Core inflation rose 0.4% over the prior month in February and 3.8% over the prior year.

Drop Rick Newman a note, follow him on Twitter, or sign up for his newsletter.

Insurance now costs the typical car owner $212 per month, or $2,545 per year, according to Bankrate.

For buyers who take out a loan, the typical monthly payment is about $530 for a used car and $740 for a new model. Insurance boosts the monthly cost of ownership by 25%-40%, money some buyers forget to account for when making a purchase.

The other thing keeping inflation high is the cost of housing, with the index for shelter, another element of core inflation, rising 5.7% year over year. Shelter costs, the BLS said, account for over two-thirds of the increase in core inflation over the last year.