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Affordability crisis: ‘Alarming’ new car prices push Bay Area buyers toward used vehicles, but they’re pricey, too

Tony Grey needed new wheels, but he didn’t want to buy a new car. It took the retired San Jose computer designer three weeks to locate a used SUV in good condition at the right price, at a Santa Clara car lot.

At $28,800, the 2023 white Nissan Pathfinder with 40,000 miles was the best deal Grey found — and slightly below the region’s average used-car price. The cost of a new version of the vehicle would have been more than $40,000.

“It had no damage at all, no scratches, the engine was good, and the inside was immaculate,” said Grey, 62. “I’ve done a used car before and as long as you’re careful, you do quite well.”

Bay Area residents wanting — or needing — to buy a car are steering this winter into what experts call an affordability crisis.

“The price of new cars, in general, has become alarming for a lot of people,” said Brian Moody, executive editor of Autotrader.com.

Those sky-high costs — averaging more than $50,000 in the Bay Area — are pushing many buyers toward used vehicles. But later-model used cars are costly, cheaper ones are scarce, and prices for either new or pre-owned cars remain far higher than before the pandemic.

In the Bay Area last fall, the average used car sold for $30,868, and the average new car sold for $47,940. This year, used car sale prices fell slightly to $30,377 in the Bay Area, while new cars took a big jump to $52,841 — probably driven in part by the popularity of relatively expensive EVs, Moody said.

Nationwide, the average monthly payment for a new vehicle in November was $753, up more than 30% from just five years ago, said Jessica Caldwell, a head analyst at Edmunds, which tracks the auto industry.

Just five years ago, 23% of new cars cost less than $25,000, and 43% were under $30,000, Caldwell said. Many buyers found interest rates as low as 4%, Edmunds reported. Now, only 5% of new cars sell for less than $25,000, and only 18% are under $30,000,

“It’s hard to find a basic car,” Caldwell said.

Adding to buyers’ woes is the high price of most everything else. A recent Edmunds study found 54% of people surveyed who were planning to buy a new or used car in the next year said they would have to work extra hours or take a side job to afford it. “This wasn’t an issue 10 years ago,” Caldwell said.

Used cars averaged $20,000 before the pandemic, shot to an all-time peak of $31,095 in 2022, and now come in around $28,000 across the U.S. But because the price of used cars flows from the cost of new ones, pre-owned vehicle prices “are not going to be trending back down,” Caldwell said.

Meanwhile, auto insurance rates that jumped 24% last year are on a similar trajectory this year, according to insurance comparison firm Insurify, and have become a crucial factor for many buyers.

“I’ve heard from a few consumers who say, ‘I bought this car, and I called my insurance company and I’m like, what? This is now unaffordable for me,'” Caldwell said.

And incoming President Donald Trump’s promised tariffs have added uncertainty to car pricing.

What’s a car shopper to do?

“Once people understand the difference between their needs and their wants, everything gets a lot easier,” said Sultan Mohammad, a salesman at Fremont Toyota.

Industry analysts say years of low interest rates plus Americans’ affinity for big, expensive vehicles with fancy bells and whistles led to skyrocketing new-car prices.

“A lot of people are just priced out of the new car market,” Caldwell said. “The used car market is just going to be naturally where a lot of consumers will find themselves, whether they want to or not.”

Recovery of auto production after pandemic-era disruptions, plus new-vehicle loan deals from manufacturers, have softened demand for used cars and stabilized prices, analysts said. But many cars that would have been made early in the pandemic would be hitting the used market in the coming months. Without them, the supply of pre-owned cars is expected to dwindle, boosting prices, Moody said.

Shoppers who can afford a newer-model used car, particularly from popular brands like Honda and Toyota, may find prices high enough that buying new makes more sense. “It’s only a small difference from the used to the new,” said Imelda Roldan, 55, of Union City, who was eyeing Corollas and Camrys at Fremont Toyota for her 17-year-old daughter. Lower interest rates on new cars — around 7% — compared to used ones — around 11% — can add to the appeal, Moody said. Rates are higher on used cars because their resale value in case of loan default is less predictable for lenders, according to credit-reporting firm Equifax.

Even wildly popular vehicle types like compact SUVs may come with low-interest new-car financing, and some of the best incentives, thanks to some two dozen models now available beyond the pioneering Toyota Rav4s and Honda CRVs, Moody said.

More affordable new vehicles exist, like a Toyota Corolla or Nissan Altima, Caldwell said. Nissan has six models starting at less than $30,000, and Toyota’s Corolla Hybrid SE starts around $26,000, Moody noted.

Prices for electric vehicles in the U.S. stayed mostly flat from late last year, with November’s average at $59,173. Dealer incentives and government grants and rebates have risen, and EV leasing deals “have been phenomenal,” Moody said.

At Stevens Creek Hyundai, Ray Schubert of Los Gatos, a semi-retired auto-industry consultant who often helps friends and colleagues find cars, was checking out electric SUVs for a school principal, and possibly one for his daughter. “I’m tempted to get something before the end of the year,” said Schubert, 54, who worried that a tax credit of up to $7,500 on leased EVs might disappear under Trump.

Schubert, 54, sees leasing as the best choice for EVs since the technology is advancing quickly.

Affordability is growing into a thorny problem for dealers and automakers, analysts said.

Over the next five years, Caldwell expects new car prices to go up, but probably not steeply, and with more incentives on offer.

Moody expects manufacturers to develop low-cost models, or sub-brands. In five years, many now-new vehicles will hit the used-car market, boosting supply and bringing better deals, Moody said.

Grey, the San Jose buyer, said uncertainty about future car prices made him glad he had found his Pathfinder, which has plenty of room for him, his wife and four grandchildren. “Now,” he said, “we’re looking at a car that will last us, hopefully, another 20 years.”