Car ownership has become unaffordable for most Americans: Report

Americans need an average annual income of $100,000 to afford a new car.

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