An alarming new Edmunds analysis reveals the $20,000 new car has nearly disappeared from the U.S. marketplace, underscoring how dramatically affordability has changed in just a few years.
Rising prices, shrinking entry-level inventory, and changing manufacturer strategies are leaving many consumers wondering whether buying a new vehicle is still within reach.
“Many factors have led to the near extinction of new vehicles priced at $20,000 or below. Part of the reason could be inflation as the cost of goods continues to rise, another is mandated government safety technologies that continue to add costs but the most important reason in my opinion is that automakers have chosen to produce higher-profit-margin vehicles as a way to earn more even though they are selling fewer units,” said automotive retail analyst Ray Shefska with CardEdge.
Shefska listed several reasons why the “affordability factor” is no longer there.
The disappearance of the $20,000 new car is about more than inflation.
Automakers have shifted towards higher-profit vehicles while reducing lower-margin entry-level models.
How ‘trimflation’ quietly increased vehicle prices by eliminating traditional base models.
Why sedans such as the Toyota Camry and Toyota Corolla continue to demonstrate strong consumer demand.
Whether buying new, buying used, or leasing makes the most financial sense today
Shefska says he doesn’t think that the consumer’s definition of an “affordable” new vehicle has changed over the last 5 or 6 years, but instead, automakers are the ones who have tried to artificially change it.
Car shoppers are facing tough choices, and analysts say buying used is probably the best bet. A 2 or 3-year-old manufacturer Certified Pre-Owned vehicle that includes extra warranty coverage probably presents the best value for those with a limited budget.
