Limited Options: Scarcity of Affordable Cars in Local Market
It is widely known that the cost of cars has skyrocketed. The combination of the COVID-19 crisis, rising inflation rates, and a limited selection of affordable options have made it nearly impossible for the average person in America to purchase a brand new car.
Based on information provided by CoPilot, the cost of new cars has escalated by an astonishing 30% in the past four years. This fact is particularly concerning when taking into account that only a mere 10% of all car purchases in the United States fall below the $30,000 price point. It is not surprising that Americans are opting to hold onto their vehicles for longer periods of time. Sadly, even searching for a pre-owned car does not present much relief; according to the data, only 28% of listings for used cars are priced at or below $20,000.
New statistics indicate that the mean cost of a freshly purchased automobile in the United States is approximately $48,451, surpassing the price of a basic BMW X3 model. This suggests that Americans have the means to purchase new and luxurious vehicles. Then, what is the reason behind this?
According to the data from Market Watch, it has been reported that the financial requirements for American consumers to afford a new car is an annual salary of $100,000. However, after conducting our own research, we have discovered that the average household income in America is actually around $80,8093. This suggests that while new cars may not be as costly as perceived, American wages have significantly decreased over the past two decades.Based on information from Market Watch, it has been stated that in order for an American citizen to purchase a vehicle, they should have an annual income of at least $100,000. However, our studies show that the median income for households in America is approximately $80,8093, indicating that the cost of new cars is not as high as believed, but rather the issue lies in the decrease of wages for Americans over the last twenty years.
According to recent statistics from Market Watch, a significant portion of households in the United States are unable to afford a brand new car. Even less expensive options such as the Toyota Corolla and Nissan Versa are out of reach for these families. The situation is even more dire for single individuals, with a staggering 82% earning below the $100,000 income threshold.
According to Pat Ryan, CEO of CoPilot, “There’s no doubt about it, 2023 posed significant challenges for those looking to purchase a car, particularly for those on a tighter budget.” Despite this, car prices across various brands and segments remained relatively unchanged throughout the year. Additionally, with multiple interest rate increases, there were limited opportunities for car shoppers to find good deals. Let’s not overlook the persistent issue of market adjustments that continue to affect car buyers in the United States.
From November 2019 to November 2023, there has been a significant increase of almost $10,000 in the average price of new cars in America.
Several factors have contributed to this phenomenon, including the ongoing COVID-19 crisis. The demand for goods drastically decreased at the beginning but experienced a sudden surge in 2021. As production slowed down, manufacturers struggled to meet the increasing customer demand, partially due to disruptions in the supply chain.
Due to this, consumers were becoming increasingly desperate and purchasing any available products at inflated prices. Producers focused on creating luxury cars, which have higher profit margins but also come with a greater price tag for buyers.
It should not be overlooked that the American market has a strong preference for large pickup trucks and SUVs. As demand for compact cars decreases, it is reasonable for manufacturers to phase out smaller models in favor of bigger and pricier options. An example of this trend is Mazda’s decision to discontinue the more affordable CX-3 while keeping the CX-30 in their vehicle lineup. This move was due to lackluster sales of the smaller CX-3. In the current market, there are only a handful of brands in America that still offer new vehicles at a price below $20,000.
However, there is a glimmer of hope. In the previous year, it was disclosed that prices of both pre-owned and brand new cars were finally stabilizing, with used car rates decreasing to an agreeable range.