Affordability will continue to be the biggest issue for the auto market going forward, and until it’s addressed, I don’t think new car sales can grow considerably. New data shows the problem is maybe, slightly, sort of improving.
Now that the fourth quarter is over, and analysts have put down their yuletide drinks and crunched some numbers, I can take a look at how the year ended in this Morning Dump.
Affordability? It’s going in the wrong direction. Sales? Even with all the mishegas of this last year, the market was up 2% last year according to early estimates, which isn’t terrible.
One brand that didn’t grow was Audi, and the brand is now in the middle of a turnaround. It’ll have to do that turnaround without a lot of its core team.
Renault is launching a new model, and I’m amused by the name.
Let’s dump!
What’s Left To Give?
A new car purchase is a complicated transaction, and the MSRP is merely one number. While Trimflation and other factors have raised overall car prices, basically every variable in a transaction has gone against consumers. Why?
When you raise the price of a car, both the selling dealer and the buyer have to find new ways to make that vehicle a practical and affordable monthly expense.
One way to do this is to offer a lower interest rate, but interest rates are probably up compared to the last time many buyers were in the market. So borrowing money is more expensive.
This can be countered with a larger down payment, but everything is getting pricier, so people don’t necessarily have more money. What’s left? You can always make the payments longer. Or you can just make the payments bigger, which usually means a lower interest rate.
Alternatively, things can just go wrong in every single vector.
I wrote a similar article last year, and people seemed surprised that a total of 18.9% of new car transactions in Q4 2024 resulted in a $1,000+ monthly car payment. According to data from Edmunds, it’s only gotten worse.
In Q4 of last year, a whopping 20.3% of new car buyers opted for a $1,000+ car payment. The amount financed rose to $43,759 from $42,113 a year earlier. As you can see in the chart above, the term increased y-o-y, and the down payment dropped.
“Auto financing trends in the fourth quarter underscored just how challenging 2025 was for car shoppers,” said Ivan Drury, Edmunds’ director of insights. “Faced with persistently high vehicle prices and borrowing costs, many consumers were forced to adapt by financing larger amounts, stretching loan terms and, increasingly, taking on four-figure monthly payments. The record-setting figures we’re seeing reflect the financial strain many buyers faced throughout the year.”
Looking ahead, Drury weighs in on how these dynamics could shape the auto market in 2026.
“Entering 2026, many of the affordability pressures that defined 2025 are still in place, including elevated new-vehicle prices and ongoing economic uncertainty,” said Drury. “That said, there are early signs of rebalancing ahead. New-vehicle prices remain high but are beginning to stabilize, lower interest rates could offer some relief for both new- and used-vehicle shoppers, and an increase in off-lease returns is expected to provide more affordable alternatives in the used market.”
If there’s some good news, it’s that interest rates are coming down and terms are at least better than Q3 of 2025. Basically, these numbers have to improve as there are only so many buyers who can reasonably swing a $1,000+ car payment.
It’s an interesting challenge to think about how to quantify how many people could actually afford a $1,000+ car payment. One way, and it’s not great, is to look at the per capita Real Disposable Personal Income (RDPI) number from the Federal Reserve Bank of St. Louis, which is about $52,000, therefore putting a car purchase at like 23% of that total number.
This is skewed, though, because of the K-Shaped economy, as that “per capita” isn’t equally shared. Most people expect a flat car market in 2026, and it’s largely because there are not enough affordable good cars that can be affordably financed for the bottom half of that K.
There are regulatory constraints (EV investment, tariffs) and larger economic ones (rates) at play here, of course, but the availability of good quality, lower-trim models of vehicles in bodystyles people want remains a persistent issue.
Car Sales Were Still Probably Up 2% In 2025
It’s impossible to know how well the market would have done in a world without tariffs and everything else, but it might not have ultimately been that different.
Overall, the early numbers show that the market hit about 16 million sales, which is an increase of about 2% from 2025. Even though everything has gotten a little more expensive, that’s not entirely a tariff cause yet, according to J.D. Power in this Reuters article:
While some automakers bumped up prices of models made outside of the U.S., tariffs did not substantially affect vehicle prices, J.D. Power found. The average new-vehicle retail transaction price in December had been expected to reach $47,104, up $715 or 1.5% from December 2024, the firm said.
There’s going to be a hearing this month on new car affordability in the Senate, but who actually shows up is a bigger question, as all the main automotive CEOs in America were asked to come testify… except Elon Musk. The double standard there is so obvious, as CEO Jim Farley has made clear, that right now that the Big 3 CEOs haven’t committed.
Does Anyone Work At Audi Anymore?
Last year, Germany’s Manager Magazin ran an article about Audi CEO Gernot Döllner, and the theme was basically that Döllner’s management system wasn’t exactly winning friends in Ingolstadt.
This week’s follow-up story? A bunch of senior members of the company are leaving, including development lead Roger Styss, who was offered a promotion but decided to depart instead. Christian Schneider, head of chassis development, is also rumored to be leaving, joining a bunch of other people in product development.
That seems bad, although I don’t really know enough about the internal workings of Audi to judge. The article does include this incredible kicker:
When a former top Audi executive heard about the exodus, he pointed to a developer in the management circle whom he considers particularly strong: “As long as Ulrich Herfeld is there, I’ll remain calm. He’s a real asset.” What this man, a staunch defender of Döllner, didn’t know was that Herfeld (54) will no longer be responsible for the software platform and the central integration of the entire vehicle. Insiders report that he will be in charge of homologation, the type approval process from regulatory authorities, which is considered a rather bureaucratic obligation. The Audi CEO has just sidelined Herfeld.
Yeesh.
Get Excited About The Renault Filante
The wild and avant-garde Renault Filante concept from a few years ago was incredible. Is Renault going to build it? Nope, instead it’s going to build a big SUV thing in Korea with the same name.
Per the company:
“Korea has exceptional strength in the D and E segments. This is why Korea is so important to Renault. Filante is the second new-generation model in the Renault International Game Plan 2027 to be designed in Korea. It illustrates our vision of a distinctive and daring crossover, a bold expression of Renault’s global move upmarket. It perfectly embodies the brand’s French roots.” Nicolas Paris, CEO Renault Korea
Renault Filante will be built at Busan (RK), South Korea, initially launched in its domestic market and then exported to other regions.
If it has at least 15% of the bonkers of the concept, I’ll be pleased. Renault has been doing good work lately, but I’m a little skeptical that this will be anything other than a fancy SUV.
What I’m Listening To While Writing TMD
Only 50,000 views have been recorded on this video from British musician Richard Hawley, so I don’t feel so bad about having missed it. Or him. The song is called “The Ocean” and it has a relaxed vibe I’m taking into 2026.
The Big Question
What’s the biggest gap you’ve seen between a concept car and the actual production vehicle we got?
Top image: News 12 Long Island/Jeep
I’m a day late with this, but seeing as the comment section is too busy berating consumers for not learning to wrench and buy beaters instead of manufacturers for eliminating affordable cars because they not make line go up as much, I will point out the largest (and most disappointing) deviation from concept to production:
Buick with the Avenir. The concept was a glorious return to the American luxury sedan of yore, but because sedans not make line go up as much as crossovers, Buick turned it into A TRIM LEVEL.
Cars built in the last 10 years are reliable enough I doubt I’ll ever buy a new car again. Both the cars in our stable were bought used and we paid well under what would have been the new car price.
I recently got an Audi Q3 TDI for rental. I understand it is rental spec, but I hated it. The interior materials are Toyota RAV4 (rental again) quality that is not bad but not bad is not enough for the premium. The engine is pretty unrefined, good fuel economy but not good enough. And then there is the ergonomic… let’s say it is the first car I hoped more functionalities where in the touchscreens.
If you can’t afford to pay cash (or at least a massive down payment) what is anyone doing paying more than 50 grand for a new car?! I cannot imagine living with the amount of debt so many of my fellow Americans willingly take on (I’m talking stuff like buying way more car than you need or can afford or credit card debt for luxuries). We have a mortgage and my wife’s car (which we put like 25 grand down on and took a 3 year loan for – because we wanted a plug-in hybrid the prices were fairly high and used options were extremely limited and not a good deal) and that’s it. I drive a 12 year old Veloster that probably needs ~$1,000 a year in repairs and maintenance but that’s way less than a car payment lol.
I see brand new cars on the road all the time that catch my eye, but then I think about what those must cost, and I get over it.
I am pretty sure I will never own a car built after 2018, and why bother, there is still so much good used stuff out there that I havent owned.
I’m a long term Audi owner. Given the less-than-desirable products they’ve produced lately, I’m not too disappointed to see the exodus of execs there.
I’d listen to that, but I already am listening to KOZT.com from Ft. Bragg, CA just north of Mendocino, my favorite place on the planet. Early mornings, 6:30 to 9:00 AM PT are particularly entertaining. On the 30s, they have a very localized newscast that is fun to listen to.
In 1981, I was a rookie engineer who thought he had all the money in the world. I bought a new Triumph TR8 for $13,300 with payments of $330 month. The CPI calculator tells me that that’s $46K and $1100 today. Old me now knows that was a bad economic decision for that point in my life, but holy crap, did I have fun. Adjusted for inflation, I don’t think current car prices are much out of line. The problem is wages.
And this is why my ten-year-old Mazda6 continues to just soldier on. Less than 100k miles (but just barely), paid off since 2019, runs and looks well, blah blah blah. I’d love an AWD Mazda SUV (CX-something or another), but I can’t/wont go back into payment world. At least not anytime soon. I can still fit the two kids, the dog, my wife, and their associated crap into the 6 when/if I need to. My wife has a low mileage 2018 Kia Sedona that we got from CarMax in August 2024, and we have a modest payment on it as well as the CarMax 100,000-mile “MaxCare” warranty. So, both of our daily drivers will be sticking around for quite a while to say the least.
Glad you don’t still have a Sunbird.
*looks in garage*
Oh shit, I thought you were implying you took it. No, it’s still there. In winter storage.
I have an E46 Convertible and a paid off 16 Chrokee. Pretty much the same setup as you, and i feel the same way. Would love a hot shit new BMW SUV but a 78,000 dollar car just isnt really in the cards for me this decade.
I’ve got a 12 year old Mazda3 with 135k and a 13 year old Mazda5 that just ticked over 155k. I could likely afford an upgrade for the 5 and I do keep an eye on the market, but nothing out there sways me into wanting a ~$400 car payment (for something used) and certainly not a >$600 note.
We regularly load up the two kids and the dog in the 3 for day trips.
This is the same repackaged ‘cars are too expensive’ take. I do not agree. It’s only unsustainable if people over leverage themselves. I know this does happen to some people, but many others can pay the $1000/month and stay solvent.
I think we’re well down the path of too many people being too over-leveraged. Just because it hasn’t blown up on us yet doesn’t mean we’re not on the way.
Can some people afford $1000/month while having an emergency fund, putting away money for retirement, not carrying credit card debt, planning for medical expenses, etc etc etc? Sure. Does that apply to the majority of those paying $1000/month? I seriously doubt it.
I agree with you on all of that! Heck, some of my own friends fall right into the overleveraged group. Husband & wife both work and have an expensive mortgage and 2 car payments with some credit card debt. He did not need a $85k diesel to pull a 20′ travel trailer but wanted that truck. Wife wanted top of the line appliances – ok, put them on the card and make payments. Not actively paying these down by doubling the payments etc like you should be doing. If one person would lose their job, its panic mode. I’ve seen it, friend had to get rid of a SxS and sell his Camaro to stay afloat 2 winters ago.
Some of them jokingly call my wife and I cheap but that does not offend me, because in this case cheap=smart. Pay off credit card at end of every month, did not get the TRX Ram, I bought a Laramie and used the balance for a kitchen addition, appliances, and some CTS-V goodies.
Easier said then done for some folks, some people want flashy stuff and do not care about rainy day. “I’ll be fine, trust me”
On the other end my friend has wood floor refinishing business and now probably a millionare (we’re mid 40s, took some time) but drives a beat down 08 Tundra and lives modestly cause wants to retire in a few years.
Don’t look ruther than Renault to answer your question. The Renault Rafale is quite far off the Caudron Renault Rafale from the 1930s.
(It’s a bit far fetched, but I still think it counts)
The Hyundai Santa Cruz was a big disappointment. It went from a 2-door with a sliding bed concept to a hacked-off Tucson.
Live within your means and buy a cheaper car.
Now get off my lawn and touch my (paid-for) Buick.
Not much to say other than my usual ‘thanks!’ Matt. Cold in my house this morning despite spam and eggs and not one but two Americanos.
I recall the GTO Concept as being quite different from what we got. Same with the first Charger from around the turn of the century.
I also recall the Sunfire GT looked decidedly better on the brochure VS real Life.
I’m gonna keep banging this drum:
Average car on US roads is 12 years old. That’s an average, mind, so half are older than that.
I don’t know what annual attrition on cars is, but gotta imagine it’s probably single-digits. Functionally, that means roughly the top 10% of households (by income) are the ones that should be buying new cars. And I’m not going to weep about new-car affordability.
Average used car payments are $500/month. And that’s for cars that are financed; the majority of vehicles in the US are paid-for (just barely, per Federal Reserve data, but that’s the data).
We do not have an affordability problem. We have two separate issues, namely we have – somehow – arrived at the expectation that everyone should be able to afford a new car (they shouldn’t, and that’s fine, because cars last a long time and are an enabling appliance for which a bare feature set is not particularly expensive), and a spending problem in which people go deep into debt to drive their ego.
Also interesting is that it’s now hardwired into our society to view cars as an investment, rather than as a tool.
Only a tool thinks of a vehicle as an investment.
Even the collectors market cars aren’t investments, they’re speculation.
Words matter, or they used to.
I was thinking about this the other day. I’m an enthusiast, yet my newest car is a 2015 (actually have two of those, one bought new, one bought 2 years old), a 2013, a 2004 and a 2002 (none of those bought new). Fleet average: 16.2 years.
All my neighbors get new cars after 2-4 years, mostly leased. It’s really strange that people who don’t really care about cars feel the need to have a new car. I hate making monthly payments but it doesn’t seem to faze anyone else.
Our cars are an ’06, ’12 and ’13.
We’re helping you keep the average down.
1986, 1994, 1999, 2019 and a honda trail90 from 1972
2019? quit screwing around with the average!
my great uncle had two trail90s at his cabin when I was a kid (too small to ride them but my dad gave me rides on the back). wonder what ever happened to them?
Marketing 101: 1. create a want where it does not exist. 2. turn the want into a need.3. make the need a desire. 4. convert the desire to a demand. Stir in ignorant, ill educated imbeciles and talk at them for two hours. Voila! Sales commissions for everyone.
That song is completely incongruous. The beginning seems like it’s from a different song. He’s strumming a guitar in the video and there’s no guitar in the track. The video looks like it was generated by AI, and come to think of it, seems like the whole song was too.
Do you need new headphones or your hearing checked?
The song is from 2005. Are we sure you’re not AI?
Admittedly, the guitar on the track does not match the strumming shown in the video, but it is pretty common to have mismatches like that between the video and the studio recording. He may have just been strumming for show or he may have been playing a different version of it than the studio recording.