A new Edmunds report that digs into the reasons for decreasing new-vehicle affordability declares that the $20,000 model is “nearly extinct.”
The analysis indicates that the average transaction price for a new vehicle hit $47,713 in March, up 33% from five years earlier, when it was $35,794.
Not only that, but five years ago, Edmunds points out that there were more models on the market at lower prices.
“In fact, when gas prices spiked in 2008, Detroit automakers scrambled to make smaller, more fuel-efficient vehicles after being criticized for losing touch with what Americans needed,” says the report by Edmunds Executive Director of Insights Jessica Caldwell.
Then low interest rates and longer loan terms helped encourage American consumers to buy bigger models with more bells and whistles, leading to the pickups and SUVs that proliferate today’s roadways, the report explains.
“But now that interest rates have shot up, and without many new vehicle options left on the lower end of the price spectrum,” it says, “buying a new vehicle will likely be out of reach for many consumers.”
The report cites statistics that illustrate waning affordability:
In March, just 0.3% of new vehicles sold had $20,000 or lower price tags, a steep drop from 8% five years earlier.
4% of sold models were under $25,000, down from 24% in March 2018.
And 17% of were under $30,000, down from 44% five years earlier.
Meanwhile, demand for bigger, more expensive models has resulted in a reverse:
17% of new models sold were priced at $60,000 or more, up from 6% five years earlier.
10% were $70,000 or higher, up from 3% in March 2018.
The report points out that with rising interest rates, many consumers will be pushed into used-model territory for affordability.
To make its point, it shows that half of full-size trucks, 94% of large SUVs, and 70% of luxury midsize SUVs sold last month cost more than $60,000, up from just 5%, 54% and 31%, respectively, five years earlier.
DIG DEEPER: Rates Rise as Auto Affordability Concerns Grow
