The Increasing Cost of New Cars is Out of Reach for Many With Decent Incomes
Many people are feeling disheartened about the idea of being able to afford a new car that they desire. A recent report by The Washington Post reveals the reasons behind the unaffordability of new cars, and unfortunately, it seems that new cars are now exclusively for the wealthy, which is disappointing news.
In 2017, there were 11 car options available for less than $20,000. However, as of March 2023, that number has dwindled down to just two. The average price of a new car has skyrocketed by 30% in the last three years, now standing at over $48,000. Even though some cars have a lower base price, it’s becoming increasingly challenging to find them. This is because automakers, dealing with a microchip shortage, are prioritizing the production of more profitable high-end versions of their vehicles. As a result, buying a new car has become a luxury that many people can no longer afford.
Reportedly, despite selling about three million fewer cars in 2022 compared to 2019, automakers’ profits were $15 billion higher due to the increased prices of their vehicles.
Jonathan Smoke, who serves as the chief economist at Cox Automotive, explained to the Washington Post that the rising prices of new cars have made them unaffordable for the median household. This has resulted in higher-income households, which typically have more wealth and better credit, dominating the market for even more expensive vehicles. The situation has led to an acceleration of the migration towards higher-priced cars.
While dealers might appear to be happy selling more profitable car models, this is not always the case. They can’t rely on the supply of rich people to be endless, and there is no guarantee that they can sell the expensive models they receive.
According to a dealer interviewed by the Washington Post, there are final edition Dodge Challengers priced at $80,000 or $90,000 that they don’t even want anymore. They also mentioned having a few very expensive cars that they are desperate to sell and are willing to offer prices just to break even. The high price of new cars has put dealers in a difficult position as they struggle to move inventory.
Getting a discount on the $90,000 edition of a $30,000 car might not be helpful for the average person who can’t afford a $700 monthly car payment, let alone one that costs more than $1,000. Even if you work hard, you may only receive a three percent raise next year, and it still wouldn’t be enough to afford a new car.