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.
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.
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.
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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I’d base it on rent:
So you have $1280 left for food and other spending money. Borrowing the advice that rent *should* only be 1/3 of your income (your reality may differ), let’s say the same applies here, so an affordable car payment should be around $426. Over a 5-year loan at 5% with 10K down, that car would cost $33,000. Without any money down, that car would cost $23,000.
I remember years ago when I was paying $550-600 for my GTI and thought that was wild; I can’t imagine some of the people paying $1000 or more per month for any car.
But it’s prolly best to use median individual income which is perhaps $45-50k versus average, the median household income is $74k not individual I believe. Plus this assumes the person is single and lives alone, not sure how common that is. So many other factors but even a single person living alone making $60k is unlikely to afford a $33k car.
I was going to lazily say $24,000 or less, but kudos to you for actually putting in the work. I don’t have it in me on a Monday after watching my team lose out on a Super Bowl bid yesterday.
I appreciate you putting in the leg work on numbers, it’s actually interesting to see how they play out theoretically.
Obviously everyone’s situation is different but I can’t even imagine paying that $400 a month figure.. our car payment is just over $200 a month and I dream every month of just not having to pay it. When I see advertised prices of $500-600 a month on TV I honestly can’t even really fathom it..
Well done on actually laying it out. I was going to say “Between $20k and $25k”, so I apparently my guess was pretty good.
Affordable is what I already own, unless something catastrophic happens to it. In that case, I’ll probably start investing in really comfortable shoes. I have a great income, but I resent directing so much of it to car ownership.
When I find one, I’ll buy it and let you know. There’s a reason my newest vehicle is rapidly approaching ten years old and it’s not that I dislike buying new vehicles. The new car market has been terrible for the past few years, which was a big factor in my decision to buy an old Prius to keep miles off my truck. I’m just thankful that I’m in a position where I’m not forced to buy anything right now. It sounds like prices are starting to normalize, but there’s a long way to go before I’ll feel good about paying the price for a new car.
I think everyone would agree that a Ford Maverick was “affordable” in 1970. It cost $1995, or $16,200 in today’s dollars. You could get it for 10% down on a 3 year loan at 11%. https://blog.consumerguide.com/wp-content/uploads/sites/2/2021/08/11970.png
In today’s dollars, you’d put about $1,600 down and spend $480 a month on the payments, which would last for 3 years.
So I’d call any new car that could give you that kind of price today “affordable.” You can’t get a $16k new car now, but you can get a $23k new car like a Honda Civic, Ford Maverick pickup, or a Subaru Impreza. If you were willing to do a 4 year loan instead of a 3 year, the payments would be the same as they were in 1970 for an affordable car.
So I guess I’d say any car under $25,000 is “affordable” by the standards we’ve usually gone by in America.
The difference is that in 1970, a three-year-old car was getting old and I’m not sure I’d want to be still making payments on something that was going to start needing a lot of maintenance.
A 3-year-old modern car is barely broken in. Going 4 or 5 years on a new car today should not mean that you have big repair expenses while still making payments.
I don’t know where you’re getting the idea that cars in 1970 were worn out after 3 or 4 years.
The first car I remember in my family was my dad’s 1967 Saab 96, that he kept until 1975. We got a Buick Electra new in 1972, and he didn’t trade it in until 1982.
Even if you look at the national averages, people were not buying a new car every 3 years. https://www.fhwa.dot.gov/ohim/onh00/line3.htm
The idea that a car only lasts you 3 years is insane. I get that things were different back then, but to show how far we’ve come, the Census puts the average age of a car in the US is 12.5 years old (13.6 if you only look at passenger cars, not light trucks/SUVs)
Cars lasted a lot longer than 3 years.
To me personally, “affordable” mans I can buy it outright without a loan.
For average Joe Sixpack American, probably means that they can make the monthly payment, even if it causes them to live paycheck to paycheck.
Well, anything you can buy with a 36 month loan you can buy outright, just 3 years later.
Too broad of a question I think to answer it definitively. I’d say under $30k would be a reasonable number BUT I’m sure most people would rather pay that number for a lightly used, higher spec vehicle.
Personally, I don’t foresee myself ever buying a new car again. As a single income family we just can’t warrant that kind of cost, especially in this day and age and with two kids.
To me, and affordable used car is something someone with an average income should be able to afford within the payment with an average interest rate following recommended income guidelines. Experts recommend that you should spend no more than 15% of your income on a car payment. The average prime rate for a car loan right now is 6.9% and the average income in the US is about 31,000. If you factor all that in and calculate the payments for a 60 month loan, the cost comes out to about $20,000. Personally, I would never spend that percentage of my income on a car payment, but I think this is an objective way to calculate how affordable should be defined.
In this day and age, sub $30k off the lot with basic comfort and convenience features, a decent expectation of reliability, and no overly exotic qualities that would drive up insurance or maintenance costs.
I concur, $30k out the door with all the basic amenities, no need for heated or automated anything, technology circa 2010 should do it.
2010’s tech is way underselling it. I would consider ADAS, Android Auto/Car Play, backup camera (required by law iirc), etc. as basic comfort and convenience. A new Civic will get you those for about $25k.
Are those things strictly necessary to act as basic transportation? No. But they are things we’ve come to expect and a basic level of capability over the past decade and a half.
I guess like this whole discussion of “affordability” though, it’s going to vary person to person. Like I don’t even hook my phone up to my car, I could not, personally, care any less about CarPlay/Android Auto.
That said, I daydream about being able to have a job I could just roll to in my ‘73 Dodge truck so I’m probably not really the target demographic for this discussion anyway.
Backup cameras are required by law, so you’ll get that in anything built in the last 10ish years. I think you need to have had Android Auto/Car Play to consider it as basic comfort etc. I’ve never had it, other than in rentals, so maybe I don’t know how much I need it. I’ve gotten by fine without it for decades though, there’s always some sort of adapter to make stuff play through your speakers!
Yeah, that is what I was going to say, $30k. I can’t believe average new car price is somewhere around $50. Anyway at $30k you can get a base Honda Accord, or a lesser model of something with a few more bells and whistles. I could spend more on a car, but I can’t really imagine spending more on a car.
Affordable to people eyes is what they get approved from the financial guy at the dealership. Unfortunately the system is designed to give you a high interest rate in case you have a bad credit score, making things that should be affordable, out of reach to so many people. You can have a steady income for years, but for one mistake you made long time ago, you are penalized. $20K-$25K is the affordable to America based on the regulations that make cars more expensive in general.
No new car sold in the US meets my definition of affordable which is:
Able to be bought out of pocket by the majority of Americans.
Most Americans can’t afford a $1000 emergency, let alone a $16K+ car, insurance, fuel, maintenance, etc.
If you have to get a loan to aquire something by definition you cannot afford said something.
By that definition pretty much nobody can afford a house.
Something… something… appreciating asset. MrLM002 has probably been listening to Dave Ramsay a little too much.
Didn’t know who that was, after a quick google search I still don’t know who that is.
The majority of Americans can’t, that’s for sure. Tiny homes are cheap to make, but local regs in a lot of places prevent them from being built in said places, and paperwork fees for a tiny home are a greater percentage of the budget of a tiny home compared to a regular home.
If I saved $2K every month even after 10 years I wouldn’t even be able to afford a 60 year old double wide in a trailer park where you own the little plot your trailer sits on in the area where I want to live (which isn’t anywhere special). It’s not because 60 year old double wide trailers are classics, or that land in an average trailer park is super valuable.
Almost noone can afford a home, due to bad regs and the fact that people buy houses as assets and not as homes.
If people treated houses as homes and we got rid of the anti tiny home regs we wouldn’t have a housing shortage. Also getting rid of mandatory parking regs would help.
I can go down to Saks right now and buy a $1000 Armani jacket without putting it on a credit card or taking out a loan (not that I would, mind you). Does that make it affordable?
For you. For most Americans? Nope.
I hear Jerry has a brand new Armani suit. And he is trying to give it away for free.
But you have to buy him a meal in order to get it.
As long as he doesn’t order the soup.
“Don’t tell me you paid $1000 for that jacket!”
-George Costanza
Has there ever been a time when the average person could afford a new car out of pocket?
25k is sort of the magic number I think. Mostly because 20k used to be that number, but even I’ll admit wages have come up a bit.
A pretty basic 5 year car loan with a little bit down results in a pretty reasonable payment at 25k. When you creep above that, things get out of control quickly; interest piles up, sales tax gets more and more severe. But I think most people would argue that paying sub 400$/month for a reliable car with a warranty that covers the length of the loan is reasonable.
This. You nailed it.
I would argue you’re more likely to nail it, Pneumatic Tool.
What was considered affordable as far as income comparison prior to, say, 2000? Or, what was the ‘rule of thumb’ for how much a spreadsheet type should budget for a vehicle purchase? 6 months income for a vehicle purchase?
Things have gotten way out of whack the past decade or so, largely due to cheap credit. People tout vehicles lasting longer leading to people feeling ‘more comfortable’ financing for an extended period of time, but I think ballooning prices and low interest rates had more to do with that. Because, by and large, are cars really more reliable than they were at the turn of the millennium? Doesn’t really seem like it to me, but maybe it’s just the rose colored glasses. And, as was mentioned elsewhere, operating costs have to factor in as well. A cheap purchase price is great, but not if insurance is sky-high and it needs thousands of dollars of repairs every year.
So, an ‘Affordable’ car would be one that an average wage earner can buy with a set amount of income. The internet is telling me the average person makes ~$60k (this seems high?), so, half of that makes a $30k car. I guess that’s affordable? Assuming other running costs stay in check?
You also have to consider that those 84+ month loans are often attached to a Stellantis or Nissan product.
I think a better term is: “attainable.”
My preference is to be able to get a moderately week equipped car for around $30k, that is still possible, increasingly less so with cars themselves getting rarer in favor of trucks, but possible. My employers require employees buy personal vehicles with an msrp of at least $35k though, so that’s what I live with.
I do think compact and subcompact cars should be available under $20k and midsize sedans should start under 25k. And we need at least one ultra barebones entry level car starting under $13k or so.
I don’t really think there’s any feature in a car that I couldn’t live without, as long as the car had enough other attributes to make me really like it, and as long as the price was right. Well, some form of heating, I guess, and a cigarette lighter to plug things into.
I’m very curious what sort of employer you have. I assume it’s because you are working with clients of some sort? In my opinion, if they care about what vehicle you get presented in, they should be providing that vehicle
I’m a sales manager for a building materials company, we have asphalt, concrete, and construction divisions, but I mostly just deal with aggregates
It’s not uncommon for employers to require use of personal vehicles and put some kind of stipulation on that vehicle. Minimum MSRP requirements are in lieu of subjective appearance/quality requirements.
They also require that it not be more than 4 years old and it has to be a 4-door. Unless it’s a pickup, they do allow single cabs
I assume some of that outlay comes back to you, right? Do you get reimbursements?
A low-end Latin American car would be great for a large number of people – using what modern technology is actually useful while omitting electronic headrests and self-closing trunks and whatnot.
“affordable” is going to vary based on your income. an affordable car will be different for someone making $75k vs $300k. it should be a % of annual income, like 20%
I’m going to use a slightly unconventional approach:
The highest trim level, including packages and factory options (so excluding roof attachments, floor mats, etc) should not exceed $30k. This means that a low or mid-trim level is fairly affordable. This excludes performance versions (Civic Si/R, Hyundai N, etc).
or
The cheapest configuration with heated seats doesn’t exceed $25k. This is my personal minimum spec as a Midwesterner and since all these infotainment screens and safety systems are included as standard nowadays, I don’t need to worry about them. Most subcompact crossovers fail this metric, though somehow the Buick Envista does better than most at $25.9k (including destination).
I’d also give hybrids a ~$2k additional allowance for fuel savings, engine wear reduction and power advantage.
$0.56/mile, all-in (this equals the portion of my income I am willing to allocate to driving divided by the expected miles driven per year). Any other cost metric is irrelevant – no car “costs $25k” – it all depends on how you finance, maintain, and use it.
I like this view, pretty much no one factors in all the costs of car ownership. Lots of factors including depreciation are overlooked by people simply in favor of sticker price (or monthly payment most likely).
“Affordable” is $25k, although that is not affordable for an awful lot of people. I would have a difficult time spending over $50k for a new car, which is probably why I drive classic cars.
My sister just bought a new Forester. She is just learning about the engine start/stop, lane departure, CVT engine lag, and all the other crap you can’t avoid today. Having to spend a lot to get something you don’t like is pretty annoying.
Affordability, unfortunately, doesn’t mean actually being able to avoid these “features”. It just means they aren’t as well-integrated and don’t work as well.
Exactly, like adaptive cruise control. I drove a low spec Corolla and I was surprised to see a fancy cruise control. It was only there to check a box. It was ok on a straight highway but if the road bent to the left, it wanted to drive me off the exit.
This is becoming a bigger and bigger problem. One of the reasons I’m still driving my truck, even though it’s reaching an age where major repairs are needed on a semi-regular basis, is that I really like my truck, and I don’t really like what I would be able to replace it with these days. All of the higher trims that come with things I want, like ventilated seats, also come with a bunch of tech and a giant touchscreen that I actively don’t want. It’s not even so much the money (which is, admittedly, eyewatering post-covid) as it is what you get for that money.
People can spend all day yelling at clouds about how no car should cost X, or they’ll never buy a car for more than Y, and how they had to wear a big yellow onion on thier belt because of the Germans.
The core question here is affordable new car. Affordable is can be a challenging number to nail down, but to realistically serve even some of the market that could really benifit from safe, reliable transportation something around $20 000, out the door with enough options to not feel like absolute punishment (I mean really base, like A/C and cruise control and a radio, no ‘the center console is an option’ bullshit)
To be affordable in my book, the purchase price and running costs shouldn’t be a financial burden to the owner. It’s all relative.
What I find affordable may be too expensive for a high school graduate working their first full time job. Conversely, what the business owner next door finds affordable is way out of reach for me.
That said, I think we still need several sub $20k cars available. The monthly payments may be high, but the running costs should be a lot lower. It’s hard to quantify reliability and warranty coverage into a cost analysis.
I’ll also add the most expensive cars I’ve ever owned (when calculated to cost per mile) were all beaters I had to dump money into to keep on the road.
$25,000
That can get you a decently-equipped Corolla or a base model Camry if you’re lucky.
You’ll need to step up about $5k to get decently-equipped crossover.
I’m finding myself shopping in the $40k range for a comfortable highway commuter – a price range I am not comfortable with. I’m old, and paid $200 for my first car.
Affordable to me? I want it to be under $25K and has a good warranty. Affordable to people in my same tax bracket, seems to be double that. I like building my savings and 401k, and not living paycheck to paycheck.
The cars features in shitbox showdown 😛
No really, time to recognize the UNECE standards. This will allow more affordable cars to be sold here.
Not sure UNECE helps you. For comparison, Mirage is called Space Star in Europe, the price range in Deutschland is apparently 12000-19000 EUR, which is approx. 13000-20500 USD, including vat (taxes). The base model is BASE, manual, no ac etc.
Maybe some chinese cars could be sold significantly cheaper, but I would guess in most industrialised countries prices are quite equal if the tech and equipment etc. is similar and the sales organization has similar (western) cost levels. Mirage is built in Thailand after all. Unfortunately the prices are creeping up everywhere.
Unfortunately the prices are creeping up everywhere.
How much of that is fallout from Covid though?
https://fordauthority.com/2024/01/fallout-from-chip-shortage-expected-to-persist-for-years/
As time goes on and more cars hit the market prices might still come down.
The cheapest one in the US is 16k without taxes due to not having any competition.
Mirage prices practically doubled as the competition disappeared. Before that, you could get a brand new Mirage in the US for less than MSRP, sometimes even less than 10k.
Affordable to.me doesnt matter what it is- hatchback, sedan, or crossover. Its the cost. What can i buy one for? And not ‘ford maverick is technically this much, if you special order it and wait xx days/months/years’. I mean walk onto a lot, and buy that car for a price. Maybe its the base model, or one with 1 or 2 options. But its there, built and available.
I would say that price these days is 25k. Seems big, but there are cars out there under that number new. And its a number that gives a little variety, not ‘you can have a 4 door sedan or 4 door hatch’ variety.
I just saw someone selling a Jaguar XJ-S for $2000…