With the average new car price is a staggering $47,148
Here’s something for reference; That’s nearly the average people pay for rent, and is more expensive than renting a Studio Apartment in 33% of the US.That’s a lot of scratch for a depreciating asset, but that’s just how it is, right?
Actually, for most of automotive history, affordable cars were the norm. Hell, Japan’s entire business model used to be “Cheap cars for everyone.” It basically allowed them to gain a foothold in the US, and then to go on and become the largest manufacturers on earth.
But what even is a cheap car?
What Is A Cheap Car?
This isn’t a trick question.
The industry has different categories for the price of new cars. They categorize inexpensive as being under 20 grand. Here’s the problem; go back 10 years ago and there were quite a few of these cheap cars. If you go back 50 years just about every manufacturer had a couple of compact or sub compacts that fit the bill.
In fact, historically, 20% of new cars sold were under 20 grand.
Nowadays, there are only a few cars in that category at all. The average cost of a tiny, bs car is 22 thousand. The average price for an average car is nearing 40k, and the total average hits an insane 47000 dollars.
What the hell happened? Why don’t car makers make cheap cars anymore? We have some theories.
Cars are lasting too long
One big problem is that cars last way too long now. In the 70s, you weren’t cool if your car was more than 3 years old. In the 90s, it wasn’t uncommon to keep a car for 5 years. Nowadays you wouldn’t even blink if you went to a big company, and even the CEO was driving a 10 year old car.
That’s partially because cars just straight up last forever nowadays. Who even thinks about 60 thousand miles as a lot anymore? It’s also because car technology has kinda stagnated. Ever since the major safety changes in the mid 2000s, the difference in safety and tech between new cars, and a car from 2012, is pretty minimal.
That’s a problem if you want to sell someone a cheap new car. There’s no incentive to buy a new car when a used one is still cheaper and just as good.
New Cheap Cars can’t Compete with Used Cars
Be honest with us for a moment. If you were about to spend 16 grand on a car, would you choose:
A brand spanking new Mitsubishi Mirage ES, a car that makes a whole 80 horsepower, has terrible build quality, and is as exciting to drive as it looks?
A 2015 Honda Civic Si. A car that is fun to drive, has a ton of aftermarket support, and will definitely last longer?
We have a feeling we know the answer. Here’s that Honda, by the way, because this isn’t really a hypothetical. A brand new Mitsubishi is more expensive than the Civic, and that means people have no reason to buy the Mits.
People don’t WANT cheap cars…
Since old cars last a long time, and since old used cars offer more features than new cheap cars, most people in the car market will just buy the used car instead.
There’s a major problem with that. Well, a major problem for manufacturers, not for people who want a great deal on a used car. When you buy a used car the maker gets nothing. Ford does not see a single penny when you buy a used Mustang.
They don’t really care about used car buyers.
In other words, manufacturers don’t give a single solitary crap about poor people. They only care about people who give them money, and that isn’t most of us.
Of course, there’s also one more big reason why people won’t buy cheap new cars. The most popular cars on the road are not cheap little cars. They are bigger, more practical crossovers.
They Want Crossovers
As you probably well know, crossovers are more expensive than little sedans. They need more material to manufacture, more gas to transport, and most importantly, simple economics dictates that they should be more expensive. The demand is high, so prices are high.
That also means that not only are car companies incentivized to make crossovers because it’s what the people want, but they also make more money per sale. There’s simply no reason for them to make a 15 thousand dollar small car, when they won’t sell as many. And the few that they do sell won’t even make them much money.
Now for the real bad news; that’s probably not going to change anytime soon. The truth is that the only people who can even AFFORD new cars are people with enough money to afford expensive cars.
No One Can Afford Cars Except Rich People
With completely stagnant wages, record breaking inflation, and a lot of economic uncertainty, there isn’t a lot of incentive for younger people to even buy a new car. This is something that started in the 80s and has only gotten worse every year.
The simple truth of the matter is that people are making comparatively less now, than they have in a very long time. Coupled with housing prices that move a cost of living into the stratosphere,
And we have to face the facts. Most of us can not afford a new car, EVEN IF that new car is cheap.
Once you sprinkle in the strong desire for much more expensive electric vehicles? The price of new cars is probably only going to get worse.
We wish we had some clever conclusion to this. We wish there was some magic advice that could change the course of New Cars, and force Chevy to build a new Monza. Maybe a RWD EV that is just a motor and a shell. That would be cool.
The truth is that reality is messy, and the best thing you can do is research. Make sure you know what the future holds, and plan accordingly.
And maybe check out the Ideal Car Strategies, so you can take advantage of those sweet used cars that will be entering the market soon enough.