The Struggle to Find an Affordable New Car in Today’s Market

It is becoming increasingly difficult to find new, affordable cars, according to industry experts.

For example, in July, only one car model, the Mitsubishi Mirage, had an average price below $20,000, as per Kelley Blue Book data. In contrast, five years ago, there were twelve cars that met this pricing criteria.

According to Brian Moody, executive editor for Kelley Blue Book, a price below $20,000 is considered an unofficial threshold for an affordable new car.

“There are not as many inexpensive new cars available as there used to be,” Moody said.

However, the transaction price does not tell the whole story, according to experts. This price reflects what the average buyer pays, which can vary due to factors such as dealer markups, promotions, and add-ons selected by buyers at the time of purchase.

Manufacturers like Kia, Hyundai, Nissan, and Mitsubishi still offer base models with prices below $20,000, said Moody.

Despite this, the list of affordable cars has significantly decreased in the past five years, according to Tom McParland, owner of Automatch Consulting.

“Whether you’re buying new or used, finding a car in the sub-$20,000 price range is challenging,” he said.

A few years ago, consumers could find entry-level vehicles starting at $15,000, said Paul Waatti, an industry analyst at AutoPacific.

The lack of options today is influenced by various factors, including consumer preferences for cars with more features, according to Waatti. He stated that Americans culturally prefer cars with features such as automatic climate control, a car play screen, and parking sensors.

Auto manufacturers are aware of this preference and use it in their marketing, added Waatti.

“Automakers want to showcase that they offer affordable vehicles in their messaging,” he said, “but in reality, they are not producing many of those lower-priced models.”

Instead, automakers are focusing on producing higher-end models with the features that consumers desire, according to Joseph Yoon, a consumer insights analyst at Edmunds.

In fact, luxury car sales have increased and now account for about 20% of total new car sales, up from 10% to 13% prior to the pandemic, said Moody.

Inflation during the pandemic has also contributed to higher car prices. Increased production costs, driven by expensive materials and supplies, have been passed on to buyers, stated Waatti.

Additionally, higher interest rates may be deterring potential car buyers, particularly those seeking the least expensive options, leading to higher average purchase prices, experts said.

According to Kelley Blue Book, the average new-vehicle purchase price today is approximately $48,000, up from around $30,000 in 2012.