It’s not unusual for new car prices to gradually increase year over year, but a significant rise in recent years is shifting the way Americans buy cars. Bloomberg reports that new cars have gotten so expensive that more shoppers, even those who are used to buying new cars exclusively, are opting for used cars.
According to data from Cox Automotive, the average price of a new car in 2024 is $48,205, up 21 percent from five years ago. That’s the industry-wide average transaction price, skewed upward by increasingly expensive luxury vehicles and full-size trucks and SUVs, but still a staggering number compared to just a few years ago.
Meanwhile, a recent Edmunds survey shows that 48 percent of new car shoppers would like to spend $35,000 or less on their next car. This shows a significant gap of over $13,000 between what Americans want to pay for a new vehicle and what it actually costs. The same survey showed 73 percent of shoppers holding off on buying a new car due to cost.
Research from consulting firm AlixPartners shows that the lion’s share of new car buyers is increasingly made up of the most affluent Americans. The top 20 percent of income earners (earning an annual household income of $265,000 or more) make up 55 percent of expenditures on new vehicles. That number was 40 percent in 2020.
“The new-car market has moved to a more affluent buyer,” says Mark Wakefield, co-head of the auto practice at AlixPartners. “People are having to buy used vehicles, having to keep vehicles on the road longer.”
In addition to transaction prices going up, debt is also more expensive than it was a few years ago. The average interest rates on car loans are 7.1 percent for new cars and 11.2 percent for used cars. Both of those numbers are up from 5.7 percent for new cars and 8.4 percent for used cars five years ago.
But perhaps the saddest statistic in the report is the fact that 0.1 percent of new cars sold so far in 2024 were priced under $20,000. As recently as 2019, Chevy had three models with starting prices under $20,000: the Spark, Sonic, and Cruze. The most affordable Chevy for the 2025 model year is the Trax, which is a bargain starting at $21,495, but it’s unfortunate for car shoppers with tight budgets that GM’s value brand has nothing available for under $20k.
Comments
I spent the last 5 days, at home, trying to buy the other half a new small crossover, to no avail. Incentives are puny and when they exist, like the case with Buick’s current “conquest” fiasco, I can’t qualify. I think Toyota is looking pretty good and we’ll keep it for 20 years. Just pure stupidity on automakers (and dealers) parts. It’s not 2021 still.
Do you really think that Japanese pos will last 20 years..
20 months would be a better thought my friend.
The problem is the used asking prices are not far from the new prices. And when you want to trade something in the depreciation is the worst I have ever seen it! Just for kicks I got a price on trading in my 2024 Corvette Z06 that I purchased new 6 months ago for a 2024 Corvette Eray. The loss I would take would be $18,000 to $22,000 in a period of 6 months. The dealerships not only make the money on the new vehicle, but they also want to make $15,000 on your trade. Ridiculous!
That’s the pain we endure when the auto makers manufacture EV’s that a good segment of the market don’t want. These vehicles are costly to produce and add on top of that Biden’s environmental enforcers and his mandated regulations being a big reason for these outrageous price increases. Let’s hope our new President will prevail upon the car makers to to go back to producing combustion cars that many of us want instead. Just saying……