Inexpensive cars are disappearing. Expensive cars are easy to find. If you haven’t been car shopping in five years or so, you may be shocked at the extent to which America’s new car market is aimed at high-income, good-credit buyers while everyone else is being squeezed out.
The End of the Affordable Car
Over the past five years, sales of new vehicles priced below $25,000 have fallen by 78%.
A new analysis by the Cox Automotive Industry Insights team took a snapshot of total new-vehicle sales in December 2017 and five years later in December 2022. It found that Americans shopping for a new vehicle priced under $25,000 have shockingly fewer choices today.
Cox Automotive is the parent company of Kelley Blue Book.
In December 2017, automakers produced 36 models priced at $25,000 or less. Five years later, they built just 10.
Sub-$25,000 cars made up almost 13% of new car sales at the end of 2017. Less than 4% of new cars sold last December fell into that price range.
Manufacturers have all but abandoned the cheap-and-cheerful market. The Chevy Spark, America’s least-expensive new car for several years, left the market in 2022. So did the Hyundai Accent.
The move leaves just three subcompact cars available to American car shoppers: the Kia Rio, Nissan Versa, and Mitsubishi Mirage. They are also the only three vehicles left on the market that cost less than $20,000 once delivery charges are added.
The end of the low-priced car pushes low-income buyers out of the new car market and into the used car market. Those rebuilding their credit are being squeezed out, too. In December 2022, buyers with subprime credit scores accounted for only 5.2% of the market. In 2017, subprime buyers were 13.9%.
Sales of More Expensive Cars Rise
Meanwhile, sales of new cars priced over $60,000 have soared, rising 163% in the same period.
In December 2017, automakers offered 61 models for sale with sticker prices of $60,000 or higher. Last December, they offered 90. Over-$60,000 cars made up more than a quarter of sales in December 2022. Five years earlier, they constituted less than 8%.
Many wear luxury badges. Last month, Americans bought a record number of luxury-badged cars — almost a fifth of all new car sales.
Others wear the emblems of affordable automakers but are hardly affordable for most Americans. All three of America’s best-selling trucks, the Ford F-150, Chevrolet Silverado, and Ram 1500, offer multiple trim levels with starting prices over the $60,000 line, and some can reach six figures with added options.
Small Signs of Hope
Last month, the final sale price of the average new car fell slightly. The cost of the average new vehicle remains near a record high — ending January at $49,388.
Cars also grew more affordable, measured by the time Americans must work to pay off a new car. Analysts believe the new car market may see falling prices through much of 2023 as automakers recover from a global microchip shortage and find themselves able to produce so many cars that they must discount them to sell them.
But some have publicly discussed keeping inventories lower than they did before the supply chain crisis to avoid having to offer heavy incentives.
Used car prices have also been falling, easing pressure on the Americans forced out of the new car market by the industry’s shift toward high-income buyers.
