Home » How Would You Define An ‘Affordable’ New Car?

How Would You Define An ‘Affordable’ New Car?

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Much has been said about the death of the affordable new car. In July of 2023, only one new car in America actually sold for less than $20,000, and over the past few years, automakers have prioritized high-margin trim levels. Add in higher interest rates than many consumers are used to, and the new car dream is now out of reach for some.

And yet, people are still buying new vehicles in droves. Whether Toyota RAV4s or Ford F-150s, new car sales volumes are rebounding as prices stay high, and cars aren’t the only things getting expensive.

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Real estate can be seriously expensive, whether renting or buying. The whole Consumer Price Index basket of goods rose dramatically in price over the past few years, compressing people’s disposable income. Sure, salaries have risen, but not everyone’s on salary, and those who are might still feel psychological effects of higher prices for everything.
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At the same time, we need to look at how consumers buy cars for greater perspective on affordability. For those who lease, money factors and residuals matter far more than manufacturer suggested retail price. Confidence in financing terms can depend on how long a vehicle is within its factory warranty. Promotional subsidized interest rates also play a huge role for those who finance their vehicles. Oh, and that’s before we even get into running costs like insurance, fuel, and maintenance.

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So, how would you define an affordable new car? Is it a compact crossover, a small sedan, something else entirely, or nothing at all? Make your voice heard in the comments below.

Photo credits: Mitsubishi; Honda

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Matt Huber
Matt Huber
28 days ago

Extinct.

Manwich Sandwich
Manwich Sandwich
28 days ago

So, how would you define an affordable new car?”

For me, affordability has to do with the Total Cost of Ownership, not the body style. The purchase price of a vehicle is merely the price of admission. And the body style is mainly about function and image.

If you have $5000 (like I did back in 2019), using that money to buy a used Honda Fit will be much more affordable than a used $5000 on a used BMW, Audi or Mercedes.

There will be a night and day difference in the TCO. And not just the cost of repairs. They will use more fuel (often requiring premium), cost more to insure… hell, even the motor oil for oil changes will cost more as you’ll have to get the fancy Euro-blend full synthetic oil if you want it to last.

I’ve been there, done that in the past (once owned a Saab 9-3 turbo)… it was nice, but not worth the money. I’d rather spend that extra money on other things.

And what is “affordable” is a moving target… and it comes down to how much money they have left when you take a person’s income and subtract their expenses.

For some people, a new Tesla Model S Plaid is ‘affordable’… they have the money, thus they can afford it.

For other people such as a student working part time, what’s “affordable” is a bicycle and/or a public transit pass (my situation when I was in university)

So in my case right now, I can technically ‘afford’ a new Tesla Model S Plaid.

But I’m not buying that for my next car as I have other priorities to spend on… such as a planned bathroom reno and paying off my mortgage.

But my next car is likely to be a used 2017/2018 Tesla Model S… which you can find now in the mid to high CAD$30,000 range.

The parts costs on those are high, but that is offset by much lower fuel and routine maintenance costs. And it has an unbeatable level of performance, awesomeness, practicality and style for the money.

The Dude
The Dude
28 days ago

We’ve really gotten to the point where just having a new car is a luxury in itself. Maybe it’s always been that way but these days it really seems pronounced.

Awkes
Awkes
28 days ago

Taking a look at definitions of affordable housing (below ~30% of pre-tax income), and dropping that number a bit because I think a car should cost less than rent to be considered affordable. So let’s say 15% of income.

Comparing that to a median income of about $46,000 you’re on monthly payments of $575, and that only meets this definition of affordable for individuals starting at the 50th percentile, or a bit lower if you’re in a position to share a car with a partner or spouse.

But monthly payments is a pretty poor judge of affordability when we’re in a world with 8-year loan terms and you end up paying the same amount for a car worth less than half of what it started at by the time it’s done. So let’s say a 5 year term is reasonable.

So by these metrics, a car with a total cost to purchase of $34,500 would be “affordable” to roughly half of the population. But that’s an “affordable” car, and we need truly cheap cars because even people below the 50th percentile should be able to afford reliable transportation in our car-centric hellscapes.

Ilikecarsandbikes
Ilikecarsandbikes
28 days ago
Reply to  Awkes

There is an argument in some circles that a car should cost 10% of annual income which immediately restricts car buying to those in the top 10% of incomes.

This is unrealistic^.

That being said, I also don’t like looking at the monthly payment for affordability, unless you also factor in gas and insurance costs, and run the numbers for how much interest your loan cost.

IMO loan terms over 5 years are a no fly zone and I would target 3. Interest rates put you into paying 9k more on a 30k loan for 8 years vs. 5500 over 5 years or ~11% of the loan over 3 years (3200).

That is a lot of money just for interest.

Urban Runabout
Urban Runabout
28 days ago

I’ll tell you what isn’t affordable or sustainable:
The two most popular nameplates in the US – The F150 and Silverado – which generally sell for more than $65,000

What would be relatively affordable?
That $30,000 EV that Elon has been promising since 2006.

What would be a truly affordable new car?
A $22,500 EV – something along the lines of a VW Polo, Mazda 2, Opel Corsa, Fiat 500e, Renault Zoe, Ford Fiesta, etc. Two or 4 doors and a hatchback, seats for four or 5, 12 cubic feet of luggage space, two driven wheels, @200 miles range, very basic tech driven off Apple CarPlay and Android Auto.
That’s all most families really need.

Last edited 28 days ago by Urban Runabout
Manwich Sandwich
Manwich Sandwich
28 days ago
Reply to  Urban Runabout

Yeah but most people don’t buy based on what they need. They buy what they want… and try to act like their wants are “needs”.

“I need a big assed truck to pull my RV”

The truth: They don’t need the RV and thus, don’t need the truck.

Urban Runabout
Urban Runabout
28 days ago

Which means that affordable cars are basic cars.
Not dream machines.
Not wishmobiles.
And definitely not gender-affirming vehicles.

Jim Stock
Jim Stock
28 days ago

An affordable new car is one that is in the long run a better deal than a used car. I have bought a new subaru justy and hyundai accent at periods in my life when I could afford those very cheap cars with no mechanical problems and good warranties that i did not need much. I could not have afforded the surprise mechanical problems of a used car and did not have the time and space to work on a used car.
My cousin bought a used malibu the same month I bought the Accent for the same price. She had horrible mechanical problems and it died way sooner than I ever needed any work done on my Accent. (one alternator in 11 years of ownership)

An affordable new car should be a viable alternative to a fancier used car.

Harvey Park
Harvey Park
28 days ago

Median household income is 75k. Take a quarter off for taxes and other inevitables and you’re at 48k. 10% of after tax income is the max I’d be comfortable committing to, so that’s a $400/month payment. That works out to a 25k car with 4k down and 6% over 5 years.

The Dude
The Dude
28 days ago
Reply to  Harvey Park

A quick internet search showed an average of ~$1k per month is spent on rent, though this varies greatly as states like California the average rent is much higher. So let’s assume $36k per year is available. And if this household has kids… well, kids (don’t get me wrong, they’re great) are expensive.

Last edited 28 days ago by The Dude
Rust Buckets
Rust Buckets
28 days ago

I can’t afford any new car. Not even close.

But I’m also very unwilling to have a car payment, ever. That particular form of debt is so easy to avoid with remarkably few adverse effects that I’m just not gonna do it. So for me, the max I can afford currently is $3-4000. With some saving up I’d say $6-10k is affordable.

If there was a new car sold for under 10k, that would be pretty possible for most Americans to afford.

Of course, a new Versa or Mirage is about the same price as very cheap cars have been forever, but housing and cost of living is higher than ever before, and most Americans are able to spend significantly less on cars than they could 40 years ago.

Slow Joe Crow
Slow Joe Crow
29 days ago

My rule of thumb for what I can afford is loan payments are 10% of monthly take home pay and term is 60 months max. I also only have one payment at a time. This means that right now 90% of new cars are unaffordable and even aused car has to be a few years old.

Nathan
Nathan
29 days ago

I bought a Kia Rio 5 door in July, and the price came out to $20,190 including the delivery charge. I would define affordable as something that comes in less than $22k after taxes.

RC
RC
29 days ago

“Affordable” and “new” to me are different considerations.

The average car on the road in the US is 12 years old. So half the population (roughly; without bogging into multi-vehicle ownership and median vs. mean) is driving something older than 12 years.

There’s a common refrain that new vehicles are safer. Which is true, on the margins, but not in a way that is particularly beneficial to people; the amount of fatalities and injuries resulting in hospitalization per million miles driven was roughly the same in 2021 and 2022 as it was in 2008, which tells me that even with safety advances, the primary issue is human.

To that end, then, I’d simply say “$20,000.” That’s enough that somebody could get by paying $400/month for 4-5 years, or roughly $13/day net of operating costs (gas, insurance, etc.). At today’s average individual income of roughly $63,000 (or $31/hour assuming a 40-hour workweek), somebody’s going to need to work about a half-hour to an hour every workday to afford the car (dependingon how one accounts for taxes and such).

All that said, though… and this might be a hot take – I don’t think new cars need to be affordable. If you’re making less than the median wage, you should probably be driving something less than the median car – to wit, something at least 5-8 years old, purchased used, and that will suffice as a transportation appliance. Plenty of Yaris, Corollas, and the like out there available cheaply, that are perfectly safe, that are inexpensive to maintain.

Cheap Bastard
Cheap Bastard
29 days ago

I think if you really want prices to come down there has to be a multi pronged approach:

1) Kill the strong demand. Prices went up because demand outstripped supply. A main “need” for cars is commuting. A new push for WFH would help kill that need. The main motivations for a return to the office have nothing to do with worker productivity or well being. Actual motivations are corporate real estate values, job security for otherwise useless management, forcing workers to patronize businesses (restaurants, gas stations, janitorial services, new cars, etc) that they would otherwise not. Municipalities are motivated by the increased tax revenue from all that. Folks who work from home have less need of a car overall and how much car is needed is greatly lessened too. Someone who had “needed” a $70k Lexus might find they can get by just fine doing the weekly grocery run in a $30k Prius.

2) The demand that remains has to demand cheaper, more basic cars. You don’t need much to go to work and back, not even to take the kids camping for a week. Almost all modern base models (and brands) are fine for just about anything. Buy a Toyota, not a Lexus.

3) If you are impressed by someone else’s fancy ride, stop doing so. A lot of people buy expensive cars to show off. Stop encouraging that with your fawning.

Oldskool
Oldskool
26 days ago
Reply to  Cheap Bastard

IMO, but I believe WFH is the major player in what got us into this mess. (Aside from Covid, which made it popular). The problem is that home can now be anywhere.

So instead of living in an urban ratrace (where the pay is), so you can have a short commute, or be car-free and use public transit…. Now you eat your cake and have it too. You can live in that dreamy small town along with your big city moneybags. So now you absolutely need a car, which I believe has raised demand overall. The WFHers have collectively have wiped out any hope of housing for locals in those areas, that were borderline affordable to begin with. I’ve watched it happen in mine. I’ve been a mechanical designer for over 25 years here, and couldn’t afford a house here if I had to buy one now. My current house was a stretch, I had to find a subprime mortgage outfit who could bend the rules. Thankfully I was raised to survive dirt cheap. No TV subscriptions. Burn wood for heat. Etc.

So what’s an affordable car for me? Nothing new that’s for sure. Take care of what I have and keep it for as long as humanly possible. If I do need something, seek out something I know to be simple and reliable, easy to work on, cheap to register and insure, and so old that it’s forgotten by most, hence little demand.

Cheap Bastard
Cheap Bastard
26 days ago
Reply to  Oldskool

Unless rents and apartment values tanked in your local cities as all those people fled I think you need to find another cause for your local housing prices. My guess would be a long term lack of residential building compared to population growth. You can thank your local NIMBYs and baby makers for that.

Maymar
Maymar
29 days ago

My first new car was about $17k CAD almost 10 years ago, Bank of Canada says that’s about $21,600 today, and it looks like the only thing available for less than that is the Mirage (which, to its credit, is really cheap compared to anything else up here). That said, I also got that financed at 0% for 84 months, which is unthinkable today (and would easily add a few grand onto the effective cost of the vehicle).

On the other hand, you can get a fair bit more car for less than $25k still, so it’s not all bad, I guess.

R4ndyD4ndy
R4ndyD4ndy
29 days ago

TLDR: A $10,000 Corrolla is more affordable than a $1000 Land Rover

Affordable is a spectrum, and it varies person to person, commute to commute, and car to car.

My Hornet is a $40,000 sticker car, but it’s a lease, and the payment is 269 a month.
I’m saving about $300 a month in fuel, so driving a brand new car is netting me $40 in savings, somehow. Very affordable.

I also have the opportunity to buy a PAIR of 90’s Toyota 4runners for $2500.
The catch? One needs a tranny AND head gaskets, and the other has a knock.
To get these back to life and on the road and fix all the other stuff that a 30 year old 200,000 mile Ohio vehicle needs to be streetable, I’d say it’s on the “unaffordable” side of things.

Also tempting me is a BEAUTIFUL Ford Excursion V10. Visions of loading up the kids, the dog, and a weekend worth of gear to head out for adventure in a big, roomy monster of a truck have me salivating.

Knowing that will cost about $23 dollars an hour in fuel to operate has me cringing.

Last edited 29 days ago by R4ndyD4ndy
Space
Space
28 days ago
Reply to  R4ndyD4ndy

Just get the excursion, the stress saving hassle of being able to load 8 or 9 passengers and cargo is worth the extra gas. Plus Dutch doors!
I will say the Suburban looks good and can probably net you like 7 more mpg.

Rust Buckets
Rust Buckets
28 days ago
Reply to  R4ndyD4ndy

SAVING $300 a month in fuel?

Mattias
Mattias
28 days ago
Reply to  Rust Buckets

In comparison to the V10 Excursion.

R4ndyD4ndy
R4ndyD4ndy
28 days ago
Reply to  Rust Buckets

Was driving my paid off 2004 Jeep wrangler, its lifted with 35’s and 5:13 gears. I got around 13-14 mpg, which was respectable for what a trail buggy it is. 60 mile a day round trip commute, and mostly backroads with steep hills. I was filling up from a quarter tank twice a week.

Rust Buckets
Rust Buckets
28 days ago
Reply to  R4ndyD4ndy

Never understood why people daily drive rock crawlers and stuff on long commutes. My friend used to daily a lifted diesel f250 ~9mpg like 50 miles a day and spent a fortune on fuel. He bought an $800 civic that paid itself off real quick

R4ndyD4ndy
R4ndyD4ndy
28 days ago
Reply to  Rust Buckets

Well for me. It’s because I genuinely LOVE driving it. People piss their pants all the time about how bad Jeeps suck to drive, but man, when its 65 degrees out or above, the doors are off, the top is off, and I enjoy a nice 40-45mph ride to work through the countryside every single day. It’s just pure joy to me. There’s still the other 2/3rds of the year where it’s not nice driving weather, and thats where I start looking for a work car.

There’s just got to be a point of return for the hassle of dealing with another car to buy, maintain, insure, license, etc. In my case, whatever I buy needs to justify it’s existence by saving me a lot of money, and it needs to save me A LOT of money if it’s not going to be entertaining and safe to drive. I have 2 littles, and with all the giant brodozers and gas and oil trucks in my area, I just cant bring myself to put my kiddos in a small car. Whatever I get needs to get 30 mpg to save me 150 a month in gas, but Im paying an extra 50 to insure it, so now were saving 100 a month before maintenaince costs. All it takes is a set of brakes and tires to erase a years worth of gas savings, so why bother? I just ran the Jeep.

Until I found out I could lease a Hybrid R/T hornet for 269 a month that is.

Rust Buckets
Rust Buckets
28 days ago
Reply to  R4ndyD4ndy

If it’s just fun to drive with the doors off I can understand that. I’d still much rather drive a stock jeep though, rather than be wearing out my rock crawler and those $$$$$ 35″ tires.

R4ndyD4ndy
R4ndyD4ndy
28 days ago
Reply to  Rust Buckets

If I can wear it out by driving it on the road, I didn’t build it right 😉

Harvey Park
Harvey Park
28 days ago
Reply to  R4ndyD4ndy

a BEAUTIFUL Ford Excursion

That’s not a thing

R4ndyD4ndy
R4ndyD4ndy
28 days ago
Reply to  Harvey Park

Stock height, unmolested, 16” polished aluminum wheels. Black over tan two tone, tan interior.

Its not for everyone, but for 5 guys and 3 days worth of gear, food, and hunting supplies, i assure you it is for some people.

Clark B
Clark B
29 days ago

What’s interesting to me is that, at least on the economy car end of the market, inflation-adjusted prices are close to the same as they were 50 years ago. My 1972 Super Beetle cost a little over $2k new, around $16k today. Just checked and there are new Mirages and Versas listed for sale here around $17k. Given the advances in safety and reliability in the past 52 years, I’d say that’s pretty impressive. That said, there really isn’t much variety on that end of the market in America today. If you want a sub-$20k car, you’re limited to very few models.

To answer the question, I’m going to say what others have said: around $25k. With a reasonable down payment and a five year loan, a $25k car isn’t a bad proposition for a lot of folks. It also gets you out of the subcompact category, a must for people who need more room.

Fuzzyweis
Fuzzyweis
29 days ago

I guess mid-20K seems right, but dang, 28 years ago I bought a base Dodge Neon coupe with a manual for under $9k new(only new car I’ve ever purchased), and then just 23 years ago I bought a new V-Star 650 motorcycle for about $6k, so in my mind $20k seems a lot for a compact car(or motorcycle).

But I guess that’s where we’re at, the Maverick looked to be a pretty good deal last year, especially with the market how it was, and the Trax looks like a good deal now. The Mirage was never as good a deal as those 2 more recent examples, it was the classic model of affordable car.

Harvey Park
Harvey Park
28 days ago
Reply to  Fuzzyweis

Adjusted for inflation, your Neon would cost under $18k today, so the sticker shock at $20k makes sense.

Fuzzyweis
Fuzzyweis
28 days ago
Reply to  Harvey Park

The funny thing is that’s about what I got my current daily driver for, so I guess to me that’s affordable, I couldn’t imagine a $1000 a month payment, that’s mortgage territory to me.

Vetatur Fumare
Vetatur Fumare
29 days ago

Judging by the comments, there is a hard line at $25K and I am not gonna argue with that.
But for $10K I can get an old car that makes me happy, allows me to keep a beater on the side, and with enough left over to repair both for years.

Drive By Commenter
Drive By Commenter
29 days ago

Affordable is the car that total cost of ownership is not leaving you paycheck to paycheck. For a lot of folks that’s about $25-30k. That’s about the inflation adjusted cost of my $20k compact car in 2011. That was plenty affordable back then.

This leads to another conversation about minimizing expenses while increasing income and savings to afford what is realistic. Although that’s really difficult for some folks for a variety of reasons not all of them personality.

Justin Haas
Justin Haas
29 days ago

Each time one of my cars dies, I get this close to buying a new(ish) car. But I can’t stomach paying $300 a month minimum for a boring, basic new car.

So I just hit up FB marketplace and get another $3,000 BMW. I just got an e36 with just over 100k miles for $2900. All it has to do is last 10 months, right?

Captain Muppet
Captain Muppet
29 days ago
Reply to  Justin Haas

For 15 years or so one of my cars was the most interesting thing I could find for a grand, and I’d run it in to the ground and then buy another. If it lasted a year it was a winner, and they usually did.

I have nicer cars now, but I’m not sure I enjoy them more than an old BMW that’s unexpectedly still working.

Harvey Park
Harvey Park
28 days ago
Reply to  Justin Haas

I like this approach.

MAX FRESH OFF
MAX FRESH OFF
29 days ago

I consider my DD to be a fairly affordable car.
I paid less than $30K for it towards the end of 2020.
The engine/transmission/bodystyle combination I purchased (turbo manual hatchback) is no longer available except on a higher trim model that starts at $33K.

David Greenwood
David Greenwood
29 days ago

No one is making a car where the primary aim is affordability, utility and reparability. Such a car would have minimal electronics, parts and panels that could be replaced with hand tools, mechanical seats/windows/mirrors, four seats, two doors, hatchback, AWD, plug in hybrid, bumpers, and no infotainment or navigation. Also no cruise control, lane departure, proximity sensors, driver attention monitors, back-up alarm, and over the air updates. Such a car would be lightweight, small and have minimal power needs, so it would be efficient and cheap to operate. It would also be cheap to repair and maintain because there is not much to break and few computers. It would not spend much time in the dealership and would generate a DIY aftermarket parts and mods scene. People would love it! Dealers and carmakers would hate it.

Justin Haas
Justin Haas
28 days ago

Tens of people would buy such a car.

Canopysaurus
Canopysaurus
29 days ago

Affordable is too subjective. There are too many income levels to consider.

If the question is, rather, what would I consider a reasonable price range for basic, low end, economy transportation, I would say $17-20k. It won’t be a crossover; it won’t drive for you; probably won’t have AWD; the radio will get AM/FM and have a place to plug in your phone (but not interface); climate controls will consist of heat and probably AC, but not multizone customizing; it won’t warm your fingers or butt; the seats will manually adjust; no touch screens because there are only about five things you can control in the cabin, so buttons; all mirrors, inside and out, will adjust manually; you’ll roll up your windows with a crank; you’ll unlock your doors and start the car with a physical key; you’ll have to dim your headlights, stay in your lane, and stop all by yourself; and if you’re very lucky, you’ll be able to shift your own gears. Lots of people just starting out, students, and folks on Social Security would be just fine with something that reliably and cheaply got them to work, school, the doctor, and the store without drama or a second mortgage.

Harvey Park
Harvey Park
28 days ago
Reply to  Canopysaurus

you’ll roll up your windows with a crank

Is that even available on vehicles for sale in America today?

Canopysaurus
Canopysaurus
28 days ago
Reply to  Harvey Park

Good question. As of last year, I could only find the lowest trim levels of the Wrangler and Gladiator with manual windows. The Chevy Spark and Nissan Versa S had them, but I think they’re both defunct now. Supposedly it’s still possible to get them on a number of vehicles (mostly trucks and mostly fleet sales) if you special order them, so it’s not likely they’ll be sitting on any dealer lots.

Livinglavidadidas
Livinglavidadidas
28 days ago
Reply to  Harvey Park

Why are power windows always brought up as some peak luxury maintenance nightmare? Like how much do power windows really add to the cost of a car that’s produced at scale? And in 20 years of driving from shitbox to nice cars I’ve never had a power window failure, I have had crank windows go wonky tho.

Harvey Park
Harvey Park
27 days ago

Yeah, I don’t really see it. It’s probably cheaper to just make one regulator for all your cars than to keep designs and parts and a production line for the crank windows.

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