Buyers fret as the average cost of a new car nears $50K
Vehicle ownership has long been a big part of the American dream
DETROIT -- After a few years of sharing a 2019 Chevrolet Trax, Dana Eble and Tyler Marcus are finally looking for a second car. But as they jump into the market, the young married couple isn't sure what they can afford.
“I just keep seeing a lot of different aspects of life getting more expensive, and it’s harder,” said Eble, an account manager for a public relations agency.
Car ownership has long been integral to the American dream. But as automakers slash the production of inexpensive models to cater to customers who can afford oversized pickups and sport utility vehicles, buyers find themselves facing sticker shock at the same time they are already frustrated by the lingering effects of high inflation.
Consumer prices rose 3.3% in March, the biggest yearly increase since May 2024, while new car prices were up 12.6% from a year ago, the Labor Department reported Friday.
New vehicles now sell for an average of nearly $50,000, up 30% in six years, and average monthly payments — based on 10% down and a 6-year note — recently hit $775. Looking for something on the cheap end? The share of vehicles listing for less than $30,000 is about 13% — down from 40% five years ago, per the car review site CarGurus.
To cope, buyers are spreading their payments out longer. Consumers choosing 7-year loans make up more than 12% of all sales, up from nearly 8% a year ago, according to auto buying resource J.D. Power. Such contracts wind up costing more in the long run because of interest payments.
“The ability to buy transportation is still out there. The question is just, what do you get for your money?” Charlie Chesbrough, a senior economist at Cox Automotive, said.
The rising cost of cars is contributing to increased concerns about affordability throughout American life. Consumers, especially young people, say they feel like everyday needs like housing, food, utilities and child care are getting costlier and wages aren't keeping up.
It is a vulnerable position for Republicans ahead of this year’s midterm elections, especially as the Iran war has pumped up gas prices that makes getting behind the wheel even more expensive.
Sticker prices have been rising since automakers discovered Americans are willing to pay more for bigger, more expensive SUVs and pickup trucks that bring the companies more profit from each sale. They have largely phased out smaller, cheaper sedans.
That is especially true for domestic carmakers; the average selling prices for many vehicles from Ford Motor Co., General Motors and Jeep-maker Stellantis have generally trended higher than those for Asian companies Honda, Hyundai, Mazda and Subaru.
Car companies are also savvy about placing desired options in more expensive trim levels that can lure consumers into a vehicle that costs more than they planned, said David Undercoffler, the head of consumer insights at CarGurus.
Advanced safety technology — lane-keep assist, automatic emergency braking, blind-spot monitoring, collision warnings and more — all add to the cost of a vehicle. Automakers are required by federal industry rules to add some features, such as rear-view cameras.
The COVID-19 pandemic pushed up auto prices because production fell, affecting both the new and used markets. Though production recovered, other supply chain disruptions and tariffs have affected prices. Meanwhile, government data shows that car insurance prices have soared 55% compared with six years ago, or just before the pandemic, driving up the number of Americans going without. Car repairs, on average, are 48% more expensive.
The share of new car buyers earning below $100,000 fell to 37% last year, down from 50% in 2020, according to Cox Automotive.
Some carmakers have acknowledged affordability concerns. In February, Ford said it would have several vehicles prices under $40,000 by the end of the decade. GM has pointed to vehicles from Buick and Chevrolet, including the Trax, as cheaper options.
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