For decades, car ownership has been a trademark of the American lifestyle, with vehicles becoming symbols of freedom, independence and even rebellion, as well as a necessity. But in 2024, the country’s legendary love story with the automobile appears to have reached a crucial point of potential no return, as cars have become unaffordable to millions.
Life has generally gotten more expensive in the aftermath of the pandemic, including the cost of cars, car insurance and car repairs.
Both new and used car prices rose to record highs during the pandemic, as the car industry was experiencing supply chain disruptions and chip shortages. Since 2020, new car prices have risen by 30 percent, according to data shared by AI car shopping app CoPilot with Newsweek. Within the same timeframe, used car prices have jumped by 38 percent.
In 2023—a year during which inflation slowed down to the point that the Federal Reserve decided to stop hiking rates—new car prices rose by 1 percent to an average of $50,364, while used car prices fell by only 2 percent to an average of $31,030.
But as things stand, cars are still really expensive for many Americans. Just 10 percent of new car listings are currently priced below $30,000, according to CoPilot. Things are not much better in the used car market, where only 28 percent of listings are currently priced below $20,000.
According to an October report by Market Watch, Americans needed an annual income of at least $100,000 to afford a car, at least if they’re following standard budgeting advice, which says you shouldn’t spend more than 10 percent of your monthly income on car-related expenses.
That means that more than 60 percent of American households currently cannot afford to buy a new car, based on Census data. For individuals, the numbers are even worse, with 82 percent of people below the $100,000 line.
Why Have Cars Become So Expensive?
“There’s no doubt about it, 2023 was one of the most challenging years to buy a car, especially for more budget-conscious consumers,” CoPilot CEO Pat Ryan told Newsweek.
“Prices saw a substantial run-up in the spring, driven by confident consumers at the upper end of the market, and they never fully recovered. Across most brands and segments, car prices have barely moved from the levels at which they started the year. When you also factor in multiple interest rate hikes, there were not many deals to be had for car shoppers.”
“Simply put, cars have become more expensive,” Joseph Yoon, consumer insights analyst at car consumer guide Edmunds—an online resource for cars inventory and information—told Newsweek. “In November 2019, the average transaction price for a new vehicle was $38,500. In November of 2023, that figure jumped to $47,939.”
The pandemic’s disruption of manufacturing supply chains, as well as outsized consumer demand in 2021, really put a strain on vehicle inventory and drove prices up significantly, said Yoon.
“Dealers practically had customers lined up to buy vehicles that weren’t available,” he told Newsweek. “Supply chain disruptions also forced manufacturers to prioritize more profitable, higher-trim vehicles in their lineups, which meant the inventory available to purchase also carried a higher sticker price.”
Karl Brauer, executive analyst at iSeeCars, told Newsweek that he expects used car prices to continue falling modestly in 2024.
“The backlog in new and used car demand that grew during the pandemic is slowly moderating, but with over 2 years of restricted new car production, in 2020 through 2022, it will take at least that long for supply to catch up,” he said.
“Macroeconomic factors like inflation and higher interest rates are also reducing vehicle demand, but not enough to drastically drop car prices in the foreseeable future.”
But there are other reasons besides pandemic-related disruptions that there seem to be no more affordable cars in the U.S.—including that automakers are increasingly focusing on the production of expensive SUVs and trucks while dropping smaller, cheaper vehicles that would cost $20,000 or less.
“Manufacturers cite disappointing sales results as primary reasons for discontinuing smaller, more affordable vehicles from their lineup,” Yoon explained.
“But car buyers’ preferences have also shifted dramatically to larger trucks and SUVs in the past 10 years or so, and even more towards high-tech and comfort amenities in the form of cameras, sensors, radars and large infotainment screens,” he said.
Unfortunately, all these features come at a significantly higher price—even if that’s often higher than the average yearly wage of millions of Americans.