New Car Prices Soar, Leaving Low- And Middle-Income Americans Relegated To Used Lots
A review of auto sales data from Reuters found that as automakers push upwards and leave budget cars by the wayside, the same gap appears on the consumer side: affluent buyers can afford to get that nice new car, but middle- and low-income buyers are pushed into the used market. The average selling price of a vehicle in the US has been on the rise over the last several decades, and currently sits around $47,000, about half the US median income in 2024, according to the US Census Bureau.
The push towards nicer cars tends to lead to larger profits for automakers in the US. It's a trend among all automakers, but especially Ford, General Motors, and Stellantis (owners of brands like Chrysler, Dodge, and Jeep). Profits from affordable vehicles are, put simply, narrow. Automakers have discontinued cheaper cars in favor of higher-margin segments, like trucks and SUVs, which the report alleges may clear a 20 percent profit margin.
Automakers still make cheaper models, but the number of affordable vehicles under around $30,000 has fallen from 25 in 2010 to 20. Meanwhile, production of larger vehicles over $40,000 has grown from 96 to 156 in the same timeframe. Automakers still offer affordable cars, but the segment is slowly dwindling as they expand upward. The shifts at the low end of the market are small, but S&P Global data cited by Reuters shows a more dramatic effect on car shopping as a result. The share of new-vehicle purchases from households earning $100,000 or less held steady (between 50% to 60%) for several years until around 2020, according to vehicle-registration data. Last year, those $100,000-or-less earners accounted for 36% of new vehicle sales.
There is, at least based on the Reuters report, a spot for a newcomer to capitalize on the lack of options in the sub-$40,000 price range for middle- and lower-income buyers. It's possible that subsidized and value-oriented Chinese brands could make their way to the US. However, those face steep regulatory hurdles and a traditionally bipartisan protectionist attitude towards new foreign brands. US automakers and those foreign brands selling cars here may feel safe from budget competitors as a result. Should an affordable new car from one of these existing brands catch on and drive sales, especially as costs escalate elsewhere in the economy, automakers could join in, creating a race for high-volume, lower-price vehicles to feed cash-strapped buyers. Until that happens, automakers will continue to produce vehicles where demand pushes them, and right now, that's upwards.