If it seems like cheap new cars are hard to come by, you’re not just imagining it. Affordable, entry-level cars are becoming increasingly rare. This is why car shopping has become more difficult for some as large SUVs gain more prominence.
Cheap new cars are disappearing as brands focus on trucks and SUVs
Inexpensive new cars under $30,000 made up just 17 percent of sales in March, according to a new report from Insider Transportation. That’s a sharp decline from five years ago, when 44 percent of cars sold were under $30,000.
Five years ago only five percent of vehicles sold were over $60,000. Now, more than half of all new vehicles sold are over $60,000. It is making cars more expensive in every way.
According to Insider, the average selling price of a new car last month topped $47,000. This represents a 25% increase over the average transaction price five years ago.
Why are new cars and SUVs more expensive?
New cars are rising in price due to a combination of factors such as supply chain constraints, economic inflation and a growing emphasis on premium SUVs.
Inflation is certainly a contributing factor to the rising cost of new cars. But it’s only a small part of the story.
For starters, many brands simply don’t sell affordable passenger cars anymore. Ford, General Motors and Stellantis have essentially ditched sedans and hatchbacks entirely in favor of trucks and SUVs. Ford was the first to announce this change in strategy a few years ago, realizing that trucks and SUVs had higher per-unit margins than most cars.
Then came the global coronavirus (COVID-19) pandemic.
Auto manufacturing supply chains ground to a halt when the chip shortage began. Manufacturers had to rank their manufacturing efforts to maximize margins. That meant prioritizing higher trim levels, bigger models and anything that could boost profits.
In addition, interest rates reached historic lows. This meant buyers could opt for more expensive models and get lower payments with longer terms. Cheap cars didn’t stand a chance under these circumstances.
Drivers buy used cars and keep them longer
It’s harder to find a new car at an entry-level price, so buyers are looking to the used market and keeping their current cars longer. According to Insider, the average age of a vehicle on the road has risen to around 12 years today.
This basically means that the average driver has owned a car since 2011. It’s understandable that people keep their cars longer, as it’s harder to trade it in for a model you can actually afford.
Are there still cheap new cars for sale?
While new vehicles are getting more expensive in general, there are still some pretty affordable models to consider. Cars.com recently compiled a list of the ten most affordable cars available right now.
| 2023 Mitsubishi Mirage ES | $17,600 |
| Kia Rio LX 2023 | $17,645 |
| 2022 Hyundai Accent SE | $17,740 |
| 2023 Nissan Versa S | $18,425 |
| Kia Forte LX 2023 | $20,585 |
| 2023 Hyundai Venue SE | $20,795 |
| 2022 Nissan Sentra S | $21,045 |
| 2023 Kia Soul LX | $21,085 |
| 2023 Hyundai Elantra SE | $21,545 |
| 2023 Subaru Impreza | $22,115 |
Yes, there are cheap new cars on the market. But there are fewer examples going to dealer lots and fewer brands willing to make them. As Insider points out, manufacturers are sacrificing market share for profits with expensive trucks and SUVs. While premium buyers are getting what they want, entry-level buyers aren’t getting what they need.
