West Kentucky Star

New cars getting out of reach for some Americans; average sticker price approaching $50,000

Car ownership has long been integral to the American dream. But as automakers slash the production of inexpensive models to cater to customers who can afford oversized pickups and sport utility vehicles, buyers find themselves facing sticker shock at the same time they are already frustrated by the lingering effects of high inflation.

Consumer prices rose 3.3% in March, the biggest yearly increase since May 2024, while new car prices were up 12.6% from a year ago, the Labor Department reported Friday.

New vehicles now sell for an average of nearly $50,000, up 30% in six years, and average monthly payments — based on 10% down and a 6-year note — recently hit $775. Looking for something on the cheap end? The share of vehicles listing for less than $30,000 is about 13% — down from 40% five years ago, per the car review site CarGurus.

To cope, buyers are spreading their payments out longer. Consumers choosing 7-year loans make up more than 12% of all sales, up from nearly 8% a year ago, according to auto buying resource J.D. Power. Such contracts wind up costing more in the long run because of interest payments.

The rising cost of cars is contributing to increased concerns about affordability throughout American life. Consumers, especially young people, say they feel like everyday needs like housing, food, utilities and child care are getting costlier and wages aren’t keeping up.

It is a vulnerable position for Republicans ahead of this year’s midterm elections, especially as the Iran war has pumped up gas prices that makes getting behind the wheel even more expensive.

Sticker prices have been rising since automakers discovered Americans are willing to pay more for bigger, more expensive SUVs and pickup trucks that bring the companies more profit from each sale. They have largely phased out smaller, cheaper sedans.

That is especially true for domestic carmakers; the average selling prices for many vehicles from Ford Motor Co., General Motors and Jeep-maker Stellantis have generally trended higher than those for Asian companies Honda, Hyundai, Mazda and Subaru.

Car companies are also savvy about placing desired options in more expensive trim levels that can lure consumers into a vehicle that costs more than they planned.

The COVID-19 pandemic pushed up auto prices because production fell, affecting both the new and used markets. Though production recovered, other supply chain disruptions and tariffs have affected prices. Meanwhile, government data shows that car insurance prices have soared 55% compared with six years ago, or just before the pandemic, driving up the number of Americans going without. Car repairs, on average, are 48% more expensive.

The share of new car buyers earning below $100,000 fell to 37% last year, down from 50% in 2020, according to Cox Automotive.

Some carmakers have acknowledged affordability concerns. In February, Ford said it would have several vehicles prices under $40,000 by the end of the decade. GM has pointed to vehicles from Buick and Chevrolet, including the Trax, as cheaper options.

But as those buyers shift to used, they are finding fewer affordable options there, too. The share of used vehicles priced less than $30,000 fell from 78% in 2021 to 69% in February, according to CarGurus. The average used vehicle sold for about $25,000 in February, and the average used monthly payments hit $560.

The inventory of used cars is being hit by a couple of trends. One is that consumers keen to avoid a big expense are hanging on to their cars longer — nearly 13 years on average now, 18 months longer than a decade ago, according to the Bureau of Transportation Statistics. And a downturn in the popularity of leasing means fewer two- and three-year-old cars hitting the market after leases expire.

New EVs generally cost more upfront, but consumers can save in the long run. The used EV market will also soon be flooded with two- or three-year-old EVs that were leased at the time federal credits were generous.

(AP Photo David Zalubowski)

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