By nearly every measure, buying a car has become extremely expensive.
Not only are new vehicle prices near an all-time high, but the interest rate to finance a purchase has also jumped dramatically. Now, fewer affordable new cars even hit the market, according to recent reports.
Today, new cars priced under $30,000 make up just 8% of the market’s supply, down from 38% pre-pandemic, car shopping app CoPilot found.
“It’s the least affordable car market in modern history,” said CoPilot’s CEO Pat Ryan.
Car shoppers like luxury
Well before the Covid-19 pandemic, consumer tastes had started to steadily shift away from sedans toward more expensive SUVs and trucks. Then, car buyers piled on options, such as high-tech touch screens, ambient lighting, 360-degree cameras and heated and cooled seats.
“There’s a war of features,” said Ivan Drury, Edmunds’ director of insights.
In response to increased demand, dealers began stocking more cars with all the bells and whistles, he said, and carmakers upgraded their lineups with high-end packages, or trim levels, and scaled back on less-expensive cars.
“It only makes sense to continue to ratchet up the price to offer more features and increase the size of the vehicle with each redesign,” Drury said.
Car prices near a record high
For new cars, the average transaction price was $47,892 in May, near an all-time high, according to Edmunds. Now, 10% of all vehicles sold cost more than $70,000, up from 3% five years ago.
On the flipside, there are fewer options available at lower price points. Just 0.3% of new vehicles sold cost less than $20,000, compared with 8% five years ago, Edmunds found.
That’s leaving more car shoppers priced out of the new car market, Ryan said.
How to get the best used car for the money
Instead of getting a new car, buyers on a budget are purchasing older cars with more mileage, which means their cost of ownership is going to go up, Ryan said.
“Those that have the least ability to pay are getting the car that’s going to cost the most to own.”