A surprising new analysis from Edmunds reveals that $20,000 new cars have all but disappeared from the U.S. market, highlighting how affordability has changed dramatically in just a few years.
Rising prices, shrinking entry-level inventories, and changing manufacturers’ strategies have many consumers wondering whether buying a new car is still within their reach.
“A number of factors are leading to the extinction of new cars under $20,000,” said Ray Szewska, auto retail analyst at CardEdge. “Part of it is inflation, which continues to drive up prices, and part of it is the ever-increasing costs of government-mandated safety technology, but in my opinion, the most important reason is that automakers have chosen to produce higher-margin cars as a way to make more money even if they sell fewer units.”
Szewska cited several reasons why the “affordability factor” no longer exists.
There’s more to the disappearance of $20,000 new cars than inflation.
Automakers are cutting back on low-margin entry-level models while shifting to higher-margin vehicles.
How “trimflation” has quietly increased vehicle prices by discontinuing traditional base models.
Why sedans like the Toyota Camry and Toyota Corolla continue to show strong consumer demand.
Does it currently make the most economic sense to buy new, used, or lease?
Szewska doesn’t think consumers’ definition of an “affordable” new car has changed in the last five or six years, but rather that automakers are trying to artificially change it.
Car buyers face a difficult choice, and analysts say buying used is probably the best bet. For those on a budget, a two- or three-year-old certified pre-owned vehicle that includes an additional warranty probably offers the best value.
