[RahulNagaraj]

According to a media report, car ownership among Americans has reached a point where it has become unaffordable to millions. The report states that post the pandemic, the cost of cars, car insurance & repairs has gotten too expensive.

Since 2020, new car prices have risen by 30 per cent, while used car prices have jumped even higher and are now 38% more than what they were 3-4 years back. As per data from CoPilot, in 2023, the average new car price was $50,364, while the average price of used cars was $31,030. The report also mentions that just 10% of new car listings are priced below $30,000 and that only 28% of used car listings are under $20,000.



Americans need an average annual income of $100,000 to afford a new car. This translates to 60% of American households currently not being able to afford a new car. The numbers get worse for individuals, with 82% of them being below the $100,000 figure.

Pat Pyan, CEO of CoPilot, stated "There's no doubt about it, 2023 was one of the most challenging years to buy a car, especially for more budget-conscious consumers." Ryan further added, "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."

Joseph Yoon, Consumer Insights Analyst at Edmunds, stated, "Simply put, cars have become more expensive. In November 2019, the average transaction price for a new vehicle was $38,500. In November of 2023, that figure jumped to $47,939."

Karl Brauer, Executive Analyst at iSeeCars, stated that used car prices will fall modestly in 2024. He stated, "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." Brauer also mentioned, "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."

Reports also mention another reason for the lower number of affordable cars in the US - the fact that automakers are increasing their focus on producing expensive high-profit vehicles and dropping smaller, cheaper cars that would cost less than $20,000.

Yoon added, "Manufacturers cite disappointing sales results as primary reasons for discontinuing smaller, more affordable vehicles from their lineup." He added, "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."

Source: Newsweek

Link to Team-BHP news

[UNSC117]

This seems surprising to me, we're seeing something like this in a country where practically everyone needs a car. We're also seeing the gap between India and the USA go down if stuff like this keeps happening.

[varunswnt]

In Tier-1 cities and new urban growth centers, we too have many households with multiple income sources. This is very relevant to our demography as well. We have seen most car sales coming from the 10–25 lacs range these days.

Originally Posted by RahulNagaraj

Since 2020, new car prices have risen by 30 per cent, while used car prices have jumped even higher and are now 38% more than what they were 3-4 years back. As per data from CoPilot, in 2023, the average new car price was $50,364, while the average price of used cars was $31,030. The report also mentions that just 10% of new car listings are priced below $30,000 and that only 28% of used car listings are under $20,000.

Americans need an average annual income of $100,000 to afford a new car. This translates to 60% of American households currently not being able to afford a new car. The numbers get worse for individuals, with 82% of them being below the $100,000 figure.

Below is a also good indicator of changing Customers buying preferences and OEMs finding ways to squeeze more profits, quite applicable to our market as well.

Originally Posted by RahulNagaraj

Reports also mention another reason for the lower number of affordable cars in the US - the fact that automakers are increasing their focus on producing expensive high-profit vehicles and dropping smaller, cheaper cars that would cost less than $20,000.

Yoon added, "Manufacturers cite disappointing sales results as primary reasons for discontinuing smaller, more affordable vehicles from their lineup." He added, "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."

[ninjatalli]

That's utter hogwash.

The same article thankfully also mentions the new car prices rose by 1% across 2023; and used car prices actually fell by 2% during 2023. Which means that by the same logic, car ownership was unaffordable in 2022. And probably in 2021 and earlier.

Car ownership in the US is dependent on auto loans. And that's a HUGE business; so much that banks like Ally Financial (bank) actually came out as a side-gig of General Motors to provide financing to their automobile customers and later branched out to be a separate company (/bank) over time.

As for cost of a vehicle ownership, why do you think credit card debt is so high in the US?!!

[da3mn]

I believe there's a tendency to oversimplify a complex issue in the article. Focusing on average prices overlooks variations in models and features, as well as manufacturers' preference to delay the production of lower variants. Additionally, economic factors, chip shortages, supply chain issues, and car upgrades postponed due to Covid will have a high impact on the increase in prices.

[Cresterk]

They will introduce some affordable cars again once people stop getting suckered into 8 year loans.

[GutsyGibbon]

Originally Posted by ninjatalli

Car ownership in the US is dependent on auto loans.

The rise is real. In 1999, a Toyota Corolla could be bought for $12k. All the way up to 2019, one could buy a Corolla with a lot more advanced features for $18k. That is negligible inflation over 20 years.

Since the pandemic, prices of both new and used have risen by a lot. With rise in interest rates, the monthly car payments have shot up, making it unaffordable for most people. With the chip shortage and shortage of parts, repair costs have risen, and so the auto insurance costs have shot up.

For auto insurance alone, I pay $11k per year for 4 cars and a bike. Safe neighborhood, clean driving records, but I have 2 young adult drivers at home. Last week I got tired of the increases, and opted to have liability only on my motorcycle. If I am feeling the pinch as a "rich" tech worker, I can only imagine how hard it must be for the blue collar worker.

[Nilesh5417]

A friend from Texas had dents on his car due to a hail storm in last February or so. The car ran fine but he wanted to get the dents fixed and he mentioned that the neatest appointment he could get from garages around his neighborhood was like 3 months after. He was also grumbling about how expensive it has become to own a car in general.

Though i dont understand the US car market, I guess this article has some truth to it. Also, car ownership is debt fuelled expense and like @ninjatalli said - easy debt = fancier, more expensive cars. We can see this all around us in India as well.

[ZenMaster]

There is also one factor driving up costs which they forget to mention.

Mandatory Safety regulations and Customer expectations that have changed A LOT since the 1990s especially in Western countries.

- complex engineering of safer vehicles for 5 star rating (which is a moving target for manufacturers as a 5 star this year might be a 0 star with the next updates of the Test criteria

- Increased number of airbags: From No airags to 2 and now minimum 6 airbags.

- Very Complex engines that needs to meet tough environmental norms

- 1000s of sensors that didn't even exist in cars 20 years ago

- Bucket loads of screens which are the rage these days

- Improved materials finishes required by customers everywhere

- Ever decreasing Tolerances of parts (i.e. more precisely produced parts) for better fit and finish.

All these things add up.

Since Customers give a lot of weightage to Brand Value these days, Manufacturer also don't want to be associated with "Cheap Cars" anymore and wants to market everything as "Premium" or "Pro".

So, they add more complexity, more tech and "faux luxury" features in the current "Economy" cars to lure the buyers.

While we all (including me) diss on a certain Chairman of a Certain Inidan Car Maker, what he says is not always wrong.

And when people are willing to buy anything if they get credit, this also fuels the greed of OEMs and Dealers, who will take any reason as an excuse to raise prices, which they then never reduce.

[Indraneel Bhat]

I know I will get roasted, but could I say this without ruffling too many feathers?? What if Car Manufacturers came with an optional in-car-entertainment package?
What if there are no touch screens in cars if you don't want one? The base models could have just a small screen for the rear view camera and bluetooth connectivity for music and taking calls at the most. None of the other fancy customizable setups? Make the car a little more simpler. The tech may also be used for safety related features, more efficient fueling etc. My point is --> keep the essentials to keep the car moving and safe. Get rid of the touch screens, glove box AC, Split AC etc. Maybe going back to simplicity (without compromising safety) may take car prices down?

Also make loans a little cheaper so that you don't end up paying the base price of a higher end car for your "made for the middle class" midsize sedan or crossover?

Lastly and a little controversially, may I add that forums such as ours may also influence people into buying a car more expensive than one can afford or maintain. There is no solution to this, because what will our forum be without some of our members talking about their Porsches, S-classes, modded 4X4s etc? But I am sure Team-BHP is the source of quite a few wildly aspirational automotive dreams

[int3]

I was looking for a car for my daughter studying in US. I was very surprised at the prices of both used and new cars.
While it is possible that easy availability of debt is allowing buyers to spend more, I am surprised that the inexpensive small car market is no longer available. Even cars like Kia Soul are costing above 20 grand.
Hoping to see some sort of a reset of this trend.

[PZK]

The biggest challenge I personally faced was in the used car inventory back in 2022.

The ongoing global microchip shortage had severely reduced new car production, sending buyers scrambling for used vehicles as alternatives. The result was a historic surge in used vehicle prices.

I was on the hunt for an affordable, entry-level SUV like a RAV4, CR-V, or CX-5. Unfortunately, the used car market was insane! RAV4s were impossible to find, and the few decent options were priced almost as high as new models. Cars I looked at one day were sold the next. It was a total seller's market – if you saw something you liked, you had to snatch it up immediately. Even new cars were selling above MSRP!

Eventually, I found a 2016 Hyundai Tucson with 77,000 miles for $16.5k. I knew it was overpriced, probably worth $10-12k under normal circumstances. But with my family and the Phoenix heat, not having a car wasn't an option. I took it for a quick test drive and paid on the spot to secure it.

Now, Carvana is only offering me $4.5k for the same car! It's frustrating, but that's how crazy the market was back then.

While the market seems to have improved with better dealer inventory, I'm not actively looking, so it's hard to say for sure. However, the current challenge lies in high interest rates. These significantly increase the cost of financing, potentially discouraging buyers in both segments(used or new).

[bvasista]

Originally Posted by PZK

RAV4s were impossible to find, and the few decent options were priced almost as high as new models. Cars I looked at one day were sold the next. It was a total seller's market – if you saw something you liked, you had to snatch it up immediately. Even new cars were selling above MSRP!

Completely agree on this point. In Jan, 2023 I was looking to buy a hybrid Toyota RAV4 and such a huge demand for a hybrid RAV4. Couple of times I sent enquiries, got a response saying it is available. In the evening when I went to showroom to checkout the car, it is gone !!

I heard from multiple sales advisors that cars are being booked even before they come to the showroom, as soon as they get a list of cars ready/in-transit.

On one instance, I test drove a Pre-Certified 2022 Rav4 (may be top version with 360 degree camera in it). The price was around around $43000.

Eventually I bought Honda CRV 2023 Hybrid Sport with AWD & Leather seating costed $45000. Liked Honda CRV than Toyota Rav4.

Crazy thing - the prices of used cars have been like new car prices

[GutsyGibbon]

A good video about some of the causes for the rise in costs of car ownership.

https://youtu.be/t9DNBxpvxs0?si=iOF66yGKlkQRMKLM

[narayans80]

Originally Posted by RahulNagaraj

the average new car price was $50,364, while the average price of used cars was $31,030.

One stat I am surprised is this. Has the change in customer expectation/preference also a cause?