I’m not trying to be clever when I say that plenty of companies make affordable cars, but no one has figured out how to make cars affordable. The government? Nope. Dealers? Definitely not. Automakers? Nah. The Fed? Also, nope. It’s a solvable problem, but no one seems to be solving it.
I’ve long ago declared affordability to be the issue of 2026 for the car industry, and this will not be the last Morning Dump dedicated to the problem. I will also not solve the problem this morning, but I want to lay the groundwork for why it feels so intractable. This ongoing tension has helped create Carvana and, occasionally, destabilized it.
Not like anyone has it quite figured out anywhere. Both Tesla and BYD would like to be the biggest seller of electric vehicles, and both are floundering in various markets to start the year. The World Rally Championship has also struggled in the United States, but it sounds like it might be coming back.
Affordability Is A Symptom Of A Diseased System, Not The Disease Itself
It is simplistic to say that greed is at the center of all of life’s problems. That Late Capitalism is the main cause. Or politics. Or the existence of an independent central bank. Or free trade. Or the Internet. Or whatever you like.
All of those are fair targets, and if you are trying to win an election or get subscribers for your Substack, a polemic focused on any of the above is going to likely to be a success. The much harder argument to make, and the far less satisfying one, is that it’s more complicated than that. In fact, I’d say the complexity is the problem.
What do I mean? There are affordable cars for sale. A lot of them. I just drove a Nissan Sentra, and I’m currently driving a Chevy Trax (reviews coming), and both of those are reasonably-priced cars that you can find at dealerships. People don’t necessarily want a Trax or a Sentra. Both are only available as FWD, Chevy and Nissan may not exactly be the most desired brands, and many cheaper cars are small in a country that doesn’t love small cars. I think people are being shortsighted not to consider either of these two, but I understand how some people may have earned or inherited a reasonable prejudice against either.
Even if you like either, keeping them affordable, though, is a challenge. Why? As Cars.com points out, few of the affordable cars for sale in the United States are actually made in the United States:
Inventory of new vehicles priced under $30,000 — the most tariff-sensitive segment — averaged 13.6% share in the first half of 2025. This is down significantly from 2019, when entry-level vehicles made up 38% of the market and reflects the third consecutive month of declines. With 92% of these vehicles built outside of the U.S., tariffs are disproportionately affecting this entry-level tier, which relies almost entirely on foreign-built vehicles.
This starts to get complicated again, because while there are some affordable cars for sale, not every brand makes a lot of its cheapest cars readily available. This trend started during the pandemic, when automakers had to make hard choices about which cars they could build, and the answer was to mostly build higher trim levels of pricier cars. You might think that’s greedy, but it’s also logical.
Automakers are starting to offer lower trim models again, and that starts with Honda, which is one of two brands that make a sub-$30k car in the U.S. with the Civic (the other is Toyota with the Corolla). That’ll help, because these are almost universally popular brands.
Problem solved? Nope! Even if you can find a sub-$30k car you like for sale, the cost of buying the car is high if you don’t have a lot of cash to put down. Before you even get to insurance costs, just financing a car is expensive, and has led to more people taking out $1,000+ a month car loans than ever before. The Federal Reserve Bank declined to lower rates, and it’s complicated, but that means relief for borrowers is probably not in the cards anytime soon.
Should the Fed cut? That’s a conversation for another time, but I’m personally conflicted. I have a sense that we’re in a bit of an AI bubble, and allowing people to borrow more money, cheaply, while a bubble is going on, could have disastrous consequences.
Could politics solve this? I think politics, partially, is to blame. I can also make this bipartisan. The government, broadly construed, pushed electric cars. That money was supposed to eventually return a profit. For most automakers, it has not, and they’ve taken billions of dollars in losses. Would this have changed if an administration change hadn’t occurred and EVs were still given tax credits? I’m not sure that would have solved the demand problem. Either way, the reversal hurt, and then tariffs were added on top of that.
If you’re an automaker, what should you do? Stick with EV investments, knowing that the next White House could bring them back? Onshoring is happening, and was already happening before President Trump, but what if the Supreme Court cancels the tariffs? What if a new Congress does? What if, eventually, a new President does? Automakers are paying for both tariffs and EV investments, with no promise of how either will eventually turn out for them. It makes tossing a bunch of incentives on new cars that much harder, as well as investing in building a small car platform in, say, Cleveland.
What about the dealers? There’s understandably not a huge amount of sympathy for dealers, but they’re also stuck dealing with these forces. Automotive News polled a bunch of them, and the answer seems to be that they also have no clue:
Buyers who have an expiring three-year lease are finding a replacement vehicle carries payments hundreds of dollars more expensive than their last, said Andy Guelcher, chairman of the Chevrolet National Dealer Council and dealer principal of Mohawk Chevrolet in Ballston Spa, N.Y. But this isn’t sustainable.
“We have to be creative,” he said. “We have to use the resources that are available to us to make it as consumer-friendly as possible and to make it as affordable as possible.”
The answer is not to extend loan terms to 8-10 years because then customers will have negative equity in their vehicles “forever,” and won’t be able to trade them in, said Don Hall, CEO of the Virginia Automobile Dealers Association.
“That means that production will slow down,” he said. “That means that dealerships will be less successful because they’re not [selling] more frequently.”
Dealers have to borrow money to keep cars on the lot, and fewer cars might mean a better margin for automakers, but it squeezes customers and dealerships alike. Too many cars can also be a problem for dealers and automakers, because it causes prices to drop too fast and inventory to build up. That’s good for consumers in the short term, but it can also cause the value of cars to drop, which in turn keeps people in negative equity longer.
Above are not even all the problems; they’re just the ones that are easiest to diagnose.
Carvana Exists Because Of This Complexity
One of the most fascinating companies in the automotive world over the last ten years may not be Tesla. I’d argue it’s Carvana, a company that’s either raking in tons of cash while also earning huge valuations, or being accused of being a house of cards by short sellers. Kinda like Tesla. Also, like Tesla, it’s not always great to bet against the company.
There’s a fantastic write-up on the company in Bloomberg Businessweek that touches on what this company represents, and I appreciate that it addresses both of the key aspects of the company: Efficient organization and a scary loan business.
Buying a car from Carvana is easy, and the model makes a lot of sense. Some of this is because the company is very good at buying, selling, fixing, and moving cars. As the article points out:
Workers on the floor with iPads track the progress of vehicles under repair using Carli, a production management system Carvana developed with Oracle Corp. The software can proactively order parts based on the condition of a vehicle and the model. (Some models are more likely to need certain repairs.) Carvana says Carli and other improvements have helped cut operations costs by $1,700 over three years. The company spends an average of $900 a vehicle compared with rival CarMax Inc., which spends about $1,200, according to JPMorgan analyst Rajat Gupta.
That’s a big deal. With affordability an issue, and the dealership experience often a mediocre one for customers, Carvana makes it easy to buy a car and processes those cars quickly and cheaply. That’s all good, but what’s the scary part of the business?
Carvana’s stock is perpetually vulnerable to aggressive short sellers. On Jan. 28 Gotham City Research LLC published a report accusing Carvana of inflating its valuation by overstating earnings and obscuring transactions between different Garcia family-owned businesses, sending shares plummeting 14% that day. Although the stock price has begun to recover, Carvana’s otherwise lofty valuation is driven by an expectation that its rapid sales growth will continue. If it doesn’t, the company will be carrying substantial expenses from its rampant expansions. But for the moment, selling auto loans is a good business if you can get it. Carvana, which makes most of its income by selling the loans it originates, has been steadily turning a profit for almost two years. It originated $9 billion in loans in the first nine months of 2025 and has had no trouble finding buyers for the debt.
This is a bit like Wile E. Coyote running off the cliff. So long as the economy stays up and one looks down, Carvana doesn’t come crashing down. That feels like a tough bet, but it’s one Carvana feels comfortable making.
Tesla And BYD Are Not Starting The Year Off Great
I’m reusing this photo we made back when Tesla v. BYD had Tesla on top in a race to the moon. Now it’s a race to stay out of the gutter. As Electrek writes, Tesla “can’t find the bottom in Europe.”
The first batch of January 2026 registration data is in from Europe, and Tesla’s freefall on the continent shows no sign of slowing down. Across five major markets that have reported so far, Tesla registrations are down a staggering 44% year-over-year, extending what is now more than two years of continuous decline.
The company sold just 661 cars in France and just 83 in Norway, the one market where it usually did well. That’s an 88% year-over-year drop. Oops. Not like BYD is having the best time, either, as the rolling back of subsidies in China resulted in a 30% year-over-year decline for the brand.
Will this be the year that someone like Geely takes a huge chunk out of both?
WRC Wants That American Money
If a mostly European brand like F1 can succeed in the United States, then why not the World Rally Championship? The series hasn’t had an event here since 1988, and that’s far too long, reports Automotive News:
“The United States represents one of the most important growth opportunities for the FIA World Rally Championship,” said Mohammed Ben Sulayem, president of the sanctioning body. “It is a nation where motor sport is part of the cultural DNA, with world-class domestic championships and a rapidly growing appetite for global competition.”
The trial event will be held this summer between Kentucky and Tennessee.
What I’m Listening To While Writing TMD
Hey, it’s the Talking Heads saying “Don’t Worry About The Government.” Is David Byrne being sincere here? That’s the question with basically every Talking Heads song.
The Big Question?
You’re asked to solve affordability. Where do you start?
Top graphic images: stock.adobe.com; DepositPhotos.com
Gonna have to disagree. It’s only complex if you have sidequests (like “Keeping autoworkers employed” or “Keeping bureaucrats feel important”) that you’re stopping at along the way.
The most affordable car is a used one. Per NHTSA data, the average age of cars on US roads is 12 years. Per Fed data, the average car is paid for.
https://www.bts.gov/content/average-age-automobiles-and-trucks-operation-united-states
(For the Fed data, you have to compare number of outstanding auto loans to number of cars in operation, but that’s how it washes out).
It’s not so much that vehicles are not affordable – they are. The 1989 Ford Taurus sold for $12,200 in 1989 – adjusted for inflation, that’s $31,000. The Taurus is gone, but how much is a bare-bones Honda Accord? $28,500ish. And you get a lot of niceties (like air conditioning and greater crash survivability) for that money.
No, the problem isn’t affordability. It’s that we – and “we” is hand-waving a lot of media, political polemics, and just outright bad education / willful obtuseness – have done a remarkably terrible job at setting expectations. If you are a 22yo college student, then a 7-year-old Toyota Yaris is the right, and affordable, car for you. Given that only 6-9% of cars are actually replaced annually by a new car, there is zero reason for anyone to feel that new cars need to be affordable, at it’s only the upper echelon of consumers that are purchasing them.
TLDR: Not everyone needs a new car, so we should stop complaining about the price of them.
Yet —
If you couldn’t or didn’t want to afford a Taurus in 1989 – there were other choices available right there on the same Ford/Mercury sales floor:
Ranger
Mustang LX 2.3
Tempo/Topaz
Escort
Tracer (the Mazda 323/Ford Laser – which is what I ended up with)
Festiva
With all the different bodystyles – you had 15 cars to choose from before you got to trim levels, options, colors, wheels, etc.
Today, there are just two Fords with a base MSRP under $31K:
Maverick, at just over $28K
And Escape, at over $30K
Two.
Improvements in safety standards and consumer expectation have wiped out the possibility of the likes of the Festiva. Like, that era of Festiva was a car that weighed 1500 pounds, or roughly one Tesla battery pack. I’m fine driving cheap cars, but consumer expectation doesn’t line up with my taste.
And every new safety standard comes with a cost. We’re on the cusp of the DUI detection rules getting implemented – that’s almost assuredly going to add another $200-500 per new car in R&D, software, equipment, and support costs (not being able to start your car in the event of a false positive is going to be a problem). I’m not anti-safety, but I think that some elements (seatbelts, airbags) should be required; others (like the paternalistic lanekeeping, backup cameras, etc.) should not, as they add to the purchase and repair costs quite steeply.
I didn’t say the Festiva was a great choice – but it was definitely an option, and some people did indeed plunk their hard-earned money down on them.
“consumer expectation” may be one thing – but we have companies who came right out and said on their earnings calls ‘we don’t want to sell anything that doesn’t have a big profit margin like our F150 – so we are discontinuing them’
This is why we are where we are.
That’s Ford, which seems to have given up being a “full-range” manufacturer in the U.S.
Now try the same thing with Kia/Hyundai. If you don’t go there looking for a full-size or larger pickup truck, you’ll likely find something suitable for under $30k. And it’ll still be FAR more reliable than the Ford of 1989 and probably the Ford of 2026.
WRC in America? Yes, please!!! Dirtfish needs to convince the FIA that it should be held in the Pacific Northwest.
If I had to solve car affordability, I’d have to tackle the herculean task of making public transit viable in a nation that was mostly built after the invention of the automobile. Only once cars stop being necessities can we actually tackle how much the damn things cost.
Simplify and shrink- the issue is people don’t want base models and when they buy the salesperson points out the difference is only $75 per month to not look like a poor
a necessary pre-condition to make cars “affordable” is a marketing decision to pursue that part of the market. right now, this seems like the end of the story…
then, product planning to integrate with current and future products.
modular designs so (outsourced) sub-systems can be used across the range. kinda like APIs for software (application program interface) e.g. contrast boeing and airbus – every boeing model has unique control sets, whilst airbus cockpits are all the same between models – no repeat r&d costs.
consider insurance cost during design, maybe don’t put lights into the bumper. maybe acknowledge right-to-repair and not require dropping the front suspension to change the oil filter ( looking at you, bmw).
finally, regulatory relief – one might argue that ADAS is not making us safer, or safer at an agreeable cost.
“You’re asked to solve affordability. Where do you start?”
Trains and subways are where public funds should be spent.
I don’t want MORE people on MY roads.
https://www.statista.com/statistics/199983/us-vehicle-sales-since-1951/
We are selling new cars like it is the 1970s despite having over a 100 million more people in the US. We have a car based transportation and hoping the ever smaller popuation of very rich will by enough cars to supply the used market for those that need cheep cars, just may not be sustainable.
Since 1976, U.S. auto sales have stayed flat while the population surged. Even though there are 125 million more Americans today, annual sales still hover between 14 and 17 million units. This means per-capita buying has plummeted from 66 sales per 1,000 people in the ’80s to just 46 today.
How long did cars last in the 1970s vs today?
A lot of truth in your statement. By 5-8 years old many were rusted out. The drivelines lasted 60k.
I had a Firebird with frame rails rotted so badly that the transmission cross member fell out. The car was 7 years old with 75k miles.
Depends. Is it a Volkswagen?
Tough but fair.
Ding! Ding!
I owned several mid-80s domestic vehicles. They were all purchased for less than a month’s pay at a kid’s job. Most were less than 7 years old, all had less than 100k miles.
They were all total crapcans by that age and probably weren’t drastically better when new.
There aren’t many cars sold today that can’t be reliably operated to at least 150k miles.
Spitballing time!
– obvious answer: quit it with the tariff tomfoolery. The market is global whether you like it or not and most of the stuff in a car still comes from China even if the final assembly is in the US.
– fun suggestion: allow quadracycles to get rid of those goofy, impractical 3 wheel cars that will never become a thing no matter how much Aptera wants you to believe
– 10 more years of the Dodge Journey *slams massive gong*
– 10 more years of the LX platform too
– But seriousy: consumers really need to divorse themselves of the “Keeping up with the Jonses” mentality (rampant comsumerism). A good argument can be made for used cars vs new but that is going to depend on how much one wants to deal with warranties and Old Car Problems(tm)
Yes!
No! There’s room for both! I mean, they’re really not all that big.
https://live.staticflickr.com/1393/4733417200_c246d1d1e2_c.jpg
As a second or third addition to a more practical fleet, 3 wheel vehicles are fine imo. But the modern examples I’ve seen significantly compromise cargo capacity compared to a 4 wheel vehicle of the same footprint (especially with one center wheel in the rear), which to me would make it a non-starter as a primary vehicle for most.
I would be nervous buying a screen-heavy used car.
Used to be able to throw a radio in any car for under $100. Now an infotainment failure can mechanically total a vehicle.
It’ll be interesting to see how they hold up for sure. Soon we’ll be getting to the point where a lot of the earlier screen heavy vehicles are 10+ years old.
I don’t even know of those parts can be a straight swap, or if they need special tools to ‘code’ them to the vehicle. Bringing the dealership into the process will certainly jack up the repair price.
I’d start by looking at what the price of a new car is made up from:
– in the US (in my case in the EU)
vs.
– in Japan/Korea.
A Corolla hybrid is 2,279,200 jpy, and an Elantra hybrid (Avante, but looks the same to me) is 25,230,000 krw. In usd they are 15,000 and 17,500.
Hot take: Not everyone needs (or deserves) a new car.
There is zero need for new cheap cars when used cars, you know, exist.
there was certainly a time period where safety & tech innovations were significant, so the newer cars were worth it.
feels like more of a plateau lately, so I somewhat agree the model refreshes are less useful than they once were.
Crash test disagree with this. Just look at recent additions like the small overlap.
And this is why we are in Gilded Age 2.
Sure, but enough people need to afford a new car for used cars to continue to exist.
This system still exists, but based on the values of used cars lately, is strained.
Has anyone else come to the conclusion that consumers simply don’t WANT “affordable” cars?
We already have cheap cars, and yet consumers almost always gravitate to more expensive trim packages or more expensive models. Everyone loves to cry about the average price of a new car being over $50k, but there is no reason one needs to spend anywhere near that much. Yet consumers continue to do so. Willingly.
For the sake of conversation I’ll make the argument that consumers can’t afford cheap cars.
I think (my opinion, feel free to disagree) part of the reason for the shift toward crossovers and away from coupes and sports cars is because people can’t afford niche vehicles. They need a jack-of-all trades vehicle.
The “soccer mom” station wagon or van paired with dad’s Firebird doesn’t work if both parents are working and both need to cart the kids around. The “weekend truck” isn’t withing most people’s budget, so people daily a pickup.
Obviously people like to drive trucks and $80k ones are luxuries. Obviously there’s a subset of people that can afford 2 new minivans, or a van plus a second car that’s big enough to fit a rear-facing seat in the back. But the generic crossover blobs cover the needs of 99% of people who can’t take the financial risk of getting something “cheaper” because what if they need something else in 2 years when they have a kid? Or a house (sorry millenials)?
My car is really starting to show its age and I think I’m gonna buy a new car soon (I know buying used is more fiscally responsible). I’m torn between a last hurrah fun manual car (something like a hot hatch or a small RWD sports car) and joining the future and buying electric. I have to say, though, trying to figure out what electric cars are actually available and what category they fall into is turning out to be a PITA.
So, I figure I’ll ask the commetariat here – are there any small (civic-ish) electric hatchbacks on the market besides the leaf (I want something a little sportier) and the mini and fiat (not my taste and seem wildly overpriced)? It feels like almost every electric vehicle available now is either a Tesla (no way for obvious reasons), a luxury brand and way more than I want to spend, or an SUV or truck.
Oh, and I know the Ioniq 6 exists but it’s also not really my taste.
The new Bolt is hitting the dealer lots now. It’s small enough that maybe you can accept it as more of a hatchback than crossover, but I wouldn’t blame you if you disagreed. Also, time will tell what kind of incentives will be available with the Bolt. If they are asking sticker, an upgrade to a EVquinox might not cost more. And for a couple grand less you could get a used EVquinox or BlazEV. Both obviously crossovers, but with more range than the Bolt plus bigger, faster, and have AWD.
Soooo, uhhhh, I say go buy a GR86
Not a full EV, but look at the current Prius.
The Prius Prime especially is a really compelling option. EV for around town commuting and errands, gas for everything else. I used to have a Volt and I loved it for that reason. The latest gen Prius looks great and does everything most people need out of a vehicle. Sporty… maybe not so much though lol
We have two Toyota hybrids in the fleet, both nearing 300k and bulletproof.
I think the payback period on the Prime versus the base Prius is tough to justify, but looking for something with a bit more zip certainly helps make the argument for the Prime (as does avoiding most gas stations).
Volvo EX30? Screen heavy, though, and pricy, but very small and fantastic design. Yellow with pine colored wool interior anyone…
Unfortunately, given the history of the world, super dramatic changes in prices, always are result of some traumatic event.
Great depression, world wars, environmental disasters, pandemics, and so forth. In the aftermath, things have to be made absolutely cheapest because of the situation. Obviously, nobody would want this. Hopefully with our “K” economy that the US is having, this won’t lead to extreme income disparity which could lead to society collapse.
On that cheerful note, let’s continue to tinker with the cost/price margins by all means and try to have a high quality of living for as many as possible in the US not just the elite.
I would argue that the quality of the affordable products in this market is definitely a factor and unlike politics or interest rates or tariffs it is actually within the manufacturers’ power to solve. However, there is no incentive for them to do so for the reasons you’re already listing. they’re trapped in their own circular thinking.
I am a broken record but still right twice a day (I just made that up, mkay) but here are my two words of the day: “Dacia” and “Duster”
I’m adding “a broken record is right twice a day” to my lexicon next to “it’s not rocket surgery”
I want a Jogger pretty bad.
“You’re asked to solve affordability. Where do you start?”
Ask the consumer to either exert some self control or stop complaining about car prices. A $24-28,000 Civic, Corolla, Sentra, K4, Elantra, or Trax is a nice car and is loaded standard with features that either didn’t exist in the 90s or were big buy-ins. These cars are widely available. They’re roomy. They’re safe. They don’t use much gas. They’re on dealer lots. You cannot simultaneously complain about car prices and pass one of these up for something trendier with a $35-45K price tag.
Someone buying a new half-ton pickup for recreational or personal preference reasons, who then complains about sticker shock and gas prices isn’t going to get sympathy from me.
APR has an effect but not like it does on mortgages. The difference in monthly payment on a $28,000 car with $5,000 down financed for 60 months is $40 if the APR drops from 6.00 to 2.00. It’s something, but it’s not much.
Don’t know what to do about insurance rates. They hit you even if when you have a clean record and a paid-off affordable car.
These are all perfectly cromulent cars. Part of the affordability crisis may be my Gen-X brain adjusting to the fact that an entry level car is now $25k. I’ll go yell at some clouds now.
Yeah, that’s a shift. $25K used to be pretty big money for a car in my head as well. But it’s the equivalent of about $9,500 in the mid-late 80s, which was the MSRP for a base Chevy Celebrity sedan. Makes a $28K Civic look like the bargain of the century now.
To add to the complexity, I want to investigate why cars need to be affordable in the first place. Basically in the United States it’s the only way to get to work. You could take the bus, but there might be smell homeless people on the bus. We could build more houses, maybe even with public money, but the house prices would go down and why should my a tax money go to help a lazy smelly homeless person (sarcasm). Also buses, like Nissan Sentra, Chevy Trax, Tata Nano, and Scion iQ, are for poor people (also sarcasm). Is it “The Culture?”
Unfortunately, outside of major urban centers, a car is the only option. I used to drive 20 minutes to catch a bus to Pittsburgh when I commuted daily.
Cherokee Trails International Pro Rally 2001 was a great event. Closest we got in my adult life to WRC in the USA. Looking forward to more rally here.
If we grant the premise that vehicle affordability is an issue (I’m not sure I do, and the evidence presented herein was a bit of a dog’s breakfast), then the answer is easy: decontented vehicles, reduced safety standards, and production in locations with cheap labor and a weak currency, powered by ICE engines. Finding a good production location is hard though, because you need to have a country where the labor is cheap and currency is weak, but the government is stable enough and pro-business enough to not worry about having your factories nationalized at a moment’s notice (or civil war, etc). For the US, I think this may mean certain Central/South American countries at some point.
We know this to be true because of what the same automakers produce in developing countries and sell for a fraction of the price. I posit that this won’t work because the American public has huge purchasing power compared to pretty much every other country and does not need to buy wheezy deathtraps or other such shitboxes. Despite worse inflation in the past 5 years, this purchasing power gap when compared to, say, Europe has only widened. The commentariat laments the lack of poverty-spec entry-level models that existed when they were kids, but that’s only an indication of the fact the average person was poorer back then.
I couldn’t agree more with your post. Is there an affordability problem? I’m not so sure
This is a great post, I agree with it completely.
People don’t buy cheap cars anymore because for the most part they don’t need to.
Cars last longer, incomes are higher, and buying something nicer every 7 years is a better deal in most people’s minds than buying something smaller and cheaper every 4.
Incomes are higher? You about to get steamrolled by a dozen posts showcasing that American wages have not kept up with the across the board increases in every sector.
Don’t make me tap the sign:
https://fred.stlouisfed.org/series/MEHOINUSA672N
No idea if it actually makes a difference or not, but I am guessing that chart wouldn’t look so rosey vs actual hours worked. I’d assume in 1984, there would be a larger portion of households that are either single earner, or, one full time worker and a part time worker where I’d guess today it’s much more likely to have dual full time workers. Is income only up because households are working more?
Also, that chart doesn’t really take much into account like if you’re working more, are you now having to pay for childcare costs? Does that additional income now disappear because housing is way more expensive? Did student loans eat all that extra money and you don’t really have that extra money to spend? What about healthcare? How much of that extra income just goes to self-funded retirement savings vs pensions?
Not sure I would say we are worse off now or not, but I think that chart is certainly overstating how much real household income has grown all things considered.
What we need is a chart that shows median household income, median household labor hours, and median household disposable income.
Throwing productivity on there would be nice too.
These are all good questions. I will say that (inflation adjusted) disposable income is up as well:
https://fred.stlouisfed.org/series/DSPIC96
But that does not fully capture the complexities of the questions you’ve asked.
That’s not a median value though. That’s an aggregate, correct? So it’s be heavily weighed by the supposed K-econony and rising inequality, correct?
Per capita shows the same effect, but yes that one was aggregate so it could be swayed by certain people having lots
https://fred.stlouisfed.org/series/A229RX0
Per capita doesn’t fully prevent that effect either, but I can’t find good metrics for household disposable income. I suspect it is also higher, but if I’m wrong about that, it could be evidence in favor of affordability issues.
Per capita wouldn’t do that, as it just divides the “total” by the number of people. You’d need to track each person’s disposable personal income and then find the median from that.
Per capita is just as vulnerable to skewed data as I questioned before.
Yes…that’s what I said…real household disposable income is what I’d want to see to prevent the issue with aggregate numbers
You’d still need real *median” household disposable income…
So I’ve been doing some searching…. At least this source seems to indicate most of the increase in income is due to increase in labor hours worked from the late 70s until late 2000s.
https://www.epi.org/publication/longer-hours-not-higher-wages-have-driven-modest-earnings-growth-for-most-american-households/#:~:text=During%20this%20period%2C%20increasing%20hours,contributed%20the%20remaining%2026%20percent.
Exactly. The link he posted does not show the whole story.
Interesting! I’m curious if anything has changed in the decade+ since that was written
The total coming in isn’t as much of an issue as what’s left over after paying for everything you need.
This has the wages adjusted by the Total cost of living. Which paints a bit of a different figure, although it only goes back to 2001
https://www.lisep.org/tlc
Right these people have taken issue with the CPI as a measure of inflation and have substituted their own figure. Perhaps they’re right, but historically that’s been fraught with peril.
They’re own comparsion says CPI is better for tracking prices and general inflation. Their index includes more up to date necessities. and fills some gaps.
They certainly seem to have put a commendable academic effort into it I’ll give them that. Far more than your average “shadow stats” person on the Internet. Do they have updates since 2023? I’m curious how it has changed now that we’re mostly out of the “COVID hangover” period.
They haven’t updated, but this article that came out a few months ago seems to allude to it not changing trends now that we’re a few more years out.
https://fortune.com/2026/01/11/affordability-economic-policy-inflation-declines-economic-wellbeing/
I better not see anyone in this thread complaining about the price of the new Prelude. It’s cheaper than it was in 1990.
Personally I think the price kind of sucks just based on comparing it to the Civic Hatchback Hybrid. It’s essentially just a Civic coupe with high trim equipment. Looks nice though?
19″ wheels, rad body, adaptive Type R suspension plus those sweet 4 piston calipers, sport seats. I’m not sure if that’s worth the $8400 premium but it can’t be far off.
This is one of those cases I think, where a company has priced their product in a way that, while honest, may be harmful for marketing.
Had Honda simply had it start at 39,600$ or something like that, people would likely gag a lot less. That number starting with a 4 is always going to get people to react, especially considering what it theoretically competes with.
Overall, I like it. And I get Honda isn’t really trying to sell many of them. And I understand it’s mostly in-line with the history of the Prelude.
I would also love for it to be less expensive (and for a 6 speed) but if median household CPI data is to be trusted as a metric of buying power, vehicle pricing is not historically out of line.
For what it’s worth, I once owned a 1990 Prelude Si 4WS with an original window sticker showing ~$19,500 MSRP. In the same year you could have purchased an IROC Z-28 for $16,800.
https://www.epi.org/publication/charting-wage-stagnation/
I can tap my sign.
You must be some kind of time traveler from 2015 when that article was written! Welcome to 2026! If you look at my sign, you’ll see large wage increases in 2015 and after continuing to today. Rejoice!
Every one of those posts will be wrong, as evidenced by Prester’s post below.
More people have more income now than before. That doesn’t mean everyone, everywhere is richer, but in a country of 340 million, it’s a lot of people.
This is a bit like locusts, right? There’s an evolutionary disadvantage to being a locust every year. In theory, buying a nicer car every seven years makes the most sense, and some people do that, but the markets are extremely different every seven years. It could be a great time to buy or a terrible time. What’s happened is, even though cars are getting older in general, people are largely still trying to buy that new car every four years or so, but we’re in a time period where that’s harder to do (partially because of interest rates). The logical thing would be to sit it out, but not everoyne can or will.
I’ve seen all the stats about average age of vehicles rising, but never remember seeing an “average time keeping a car bought new” stat.
This would be an interesting thing for the site to publish if it exists.
In any case, to the larger point, resale values are also up, so the new car buyer trading in after 4 years also has more options open to them than they did in the past where a car was much closer to being depleted in that time. Either way, more people can afford better cars, and less have to settle for small, cheap ones.
Old debate here, maybe mirrors the haves vs have nots of the current state of US society. I don’t understand why this is still a debate. The cost of owning a car (yes, I will include insurance here because it comes out of the same wallet) has gone up as a percentage of income, period. And you may not be wrong when arguing that more people can now afford that $50k ride, but it’s still a higher chunk of their income than it used to be.
Now that could certainly be good evidence of an affordability issue, if Americans were spending more as a percentage of their inflation-adjusted household income on cars. It could also mean they’re doing that by choice, but either way, let’s see those numbers!
As far as I can tell, general inflation has outpaced new car prices but insurance has definitely gone up faster than inflation (using car maintenance and repair as a proxy here for insurance because I can’t find figures for that):
https://fred.stlouisfed.org/graph/?g=1Raci
I think this is the crux of the problem. Inflation adjusted vehicle costs are pretty much spot on, and while you can argue that the bottom end of the affordability market (the Fiestas and Yarises) are gone, it comes down more to what people are spending their money on. Insurance being a great example of an expense that’s outpaced inflation (not just car insurance, but the expense of health insurance). Housing has far outpaced inflation in recent years. Food is a mixed bag, but in some cases has again outpaced. So car costs to income hasn’t changed, but there’s less income available to most people.
Sort of a different argument, but the cost of used cars skyrocketing during the chip-shortage portion of the pandemic and lingering on is important to point out when we’re talking about people opting for new instead of buying used.
A lot of the cost comes from complexity and I see two ways out of it for the manufacturers. Option A would be to have more vertical integration, especially for things that generally are tied to the CANBUS network. A lot of extra engineering time is currently spent getting a ZF transmission, a Delco window regulator, a Bosch ABS pump, etc. to all talk together when many of the devices can be simplified if they are all built in-house and meant to work together as one whole. Option B would be to go the opposite direction and have far more standardized parts and protocols that are shared among many manufacturers. For example ACME suspension may make 4 different sizes / types of air-ride shocks or steering racks with set mounting points and everybody from KIA to Jeep to Mercedes standardizes on them.
The heart of the issue is that people just don’t care if more affordable cars are made and exist. They want the exact car they want but just cheaper. People don’t want to buy a Trax, they want to buy a Suburban, but have it cost 50k instead of 80k without giving anything up. That is just not a solvable problem.
Well said, more succinctly than I could manage. What was once aspirational has become largely non-negotiable. A vehicle today which is just as safe & environmentally friendly as an entry-level car 40 years ago would be wholly unacceptable and a flop at nearly any price – most people would rather buy used.
Repeat that cycle in perpetuity, and the used market (of increasingly-nice vehicles) becomes the biggest enemy of affordable new cars.
“You’re asked to solve affordability. Where do you start?”
Eliminate franchised car dealers and allow manufacturers to sell directly to consumers. Dealers provide almost no value during a car purchase these days. Small manufacturer owned showrooms (like those used by Tesla and Rivian) are enough to allow buyers to test drive and learn about vehicles without wasting money on space for inventory or having sales staff who’s livelihoods depend on buyers spending as much money as possible. My understanding is that service departments earn most dealer revenue, so manufacturer (or independently owned) make-specific service departments still could exist without the sales side of the business.
This wouldn’t save a lot of money, but lowering prices ~5-10% by cutting out valueless middlemen would be a good start. Buyers would almost certainly prefer this over what we have now.
(Incidentally, I’m aware car dealer lobbyists will ensure this never happens even if it would be better for consumers)
Car dealers are middle men. Middle men provide no value. They take a piece of the pie, a cut of action, from the overall total, thus raising costs for all. Our present economy? We don’t make much, and an increasingly small group of individuals just shuffles money around, looking for some gains.
I don’t have a problem with salesmen/middle men in some contexts. Salesmen/middle men can add value if they provide useful information that helps customers get the right product or if they help bring the right buyer to the right seller. For car sales, though, almost all information needed to determine which car to purchase is available online. In that sense, car salesmen provide zero value.
However, I would actually argue that car salesmen provide negative value. People shop online and find a car that meets their needs and budget. They then go to a dealer where a salesman upsells them a more expensive product. Manufacturers then build increasingly luxurious and expensive vehicles in response.
Others (and myself on many occasions) have argued that high car prices are reflective of consumer demand. However, I wonder if consumers might demand cheaper products if companies used a direct sales model (i.e. one where you spec and buy the car you actually want/need) instead of salesmen incentivized to upsell?
Oh I know this one! Cheap labor and low import taxes? Basically just let the flood gates loose on importing Chinese cars. It’s what happened in the 70s with Japanese cars and 80s with Korean cars, we’ve just missed a couple decades of having that sort of disruption, but I feel like, especially with companies like Dodge only offering +$40k cars, at some point the dam will burst they’ll have to be let in.
This is economic suicide. Europe is currently doing this, but it’s a horrible idea.
When you have to lay off all the workers, and associated industries, does it matter that you can buy a car for 10k?
Yep, it’s pretty bad, but so is financing a car for 10 years. Consider what happened in the 80s and 90s, American makes started competing, we got Cavaliers and S10s and the Taurus and Saturn.
Then we had the recession and GM actually killed 3 of it’s cheaper brands, not Cadillac or GMC or Buick but Saturn/Pontiac/Oldsmobile, Toyota got rid of Scion, Chrysler got rid of Plymouth, they took the opportunity on consolidation to go high end…in a recession!
I don’t think you can compete with massively unfair labor practices.
No slavery allowed in the USA to make your sneakers, so I wouldnt expect Americans to work in similar conditions to make cars.
Nuking the little that is left of American manufacturing is not a solution to anything.
and to bang the drum once again – you can’t just destroy local large-scale manufacturing as if things get dicey (globally), you need to be able to make some things…..fast.
I’m not sure the Chinese cars would be selling much less than $20k over here, if so I doubt they’d pass safety regulations. But if they come in at around $20k and are popular enough, the domestic makes may adjust their portfolios to better compete. If Ford can make a profit on the Maverick, which starts under $30k, and GM can make a profit on the Trax and Nissan on the Sentra, then there’s options, also China doesn’t make an F150 so there are certain makes that are fairly invasion proof.
I’m also still watching Slate, if their small footprint manufacturing works and is profitable then that may be another way forward, these giant manufacturers that need to sell millions of cars a year to be profitable and can’t afford to make truly affordable cars just due to their massive scale. If smaller makes can sprout up for a fraction of the cost of running your Fords or GMs and make it then I’m all for it. Bring on the Slates and Telos and Apteras and other weird home grown brands.
We certainly didn’t learn our lesson in the 70s-90s. We just moved forward at full speed ignoring what was happening. So yes, the economic suicide is self-inflicted.
Free market capitalism for when it benefits the big corporations, closed door nationalism when it doesn’t.
I get that American’s preferences for large, feature laden cars controls a lot of it, but the reality is, automakers don’t try to sell inexpensive vehicles here. They can make them, and in many ways they exist. But they don’t market them, dealers stock limited numbers in undesirable specs, options like colors and other things that might make a small hatchback or sedan “cheap and cheerful” are purposely avoided. The old way of “entice young and cheap people with interesting affordable products in hopes that they’ll move up the ladder and buy more expensive stuff later” has been abandoned. Now it’s “how do we convince anyone and everyone that the most basic thing you should consider is a mid-trim RAV4?”.
The US is also missing the “up and coming” brand that past generations used to gamble on, like the Koreans for instance. And it sure doesn’t look like we’re going to have anything like that anytime soon.
It’s abandoned because young people are barely making it. Home ownership is already out of reach. You think they’ll have the resources to ‘move up’ in cars over their lifetimes? They’re barely surviving.
Can’t argue with that.
And yeah, most of these arguments about affordability are rooted in the housing crisis.
Indeed it is a complex problem without a simple solution.
The reality is, Americans, by and large, can still afford expensive cars. Perhaps with what seem like unreasonable terms/interest rates/etc, but they still sign the dotted line. If more Americans bought the little Mitsu Mirage, it would still be sold.
This is like the housing market. We can talk a lot about unsustainable pricing, but it’s not really true. When you see 50 year (and more!!!) mortgages, like you do in Europe, that shows you truly unsustainable pricing.
‘Poor’ americans still have it better than pretty much everyone on the planet. And they spend accordingly. If inflation continues, eventually they will be forced to stop buying things they can’t afford. But I think we’re missing a while for that to happen.
I’ve said it before, and I’ll say it again, but the reason you have micro cars in other countries is because people there cannot afford anything else. They don’t want to live like sardines in their tiny apartments, or use public transport, or drive tiny cars. They do it because they cannot afford anything else. As soon as they do, surprise surprise, they buy big cars, big houses and live a bit like Americans. It’s just human nature.
No one believes me when I say that when I lived in Europe, everyone’s dream cars were large American trucks and muscle cars, not what we think of as “Euro” stuff.
The fact that I owned a Pontiac G8 with a 6 liter V8 and paid about 20,000 euros for it new at the time was so mind boggling to them it might as well have been science fiction.
I believe you. Like anywhere, you lament what you don’t have access to. Would those same Europeans be stoked to have large vehicles clogging their narrow infrastructure? Probably not. But they largely don’t have to worry about that when dealing with hypotheticals.
Having visited Munich for work over the years, there always seem to be more and more large vehicles on the road every time I visit. Curious to see Italy, will be going back soon after a visit over 20 years ago.
I believe you. We had a Chevy Tahoe there for a while, and gas station attendants would come out of their booths, jaw open, and ask “is that an American V8?” like if we were living in mad max world.
You’d park that piece of shit at a ski station next to a Cayenne Turbo and you got as much attention as if you were driving a lime green Urus.
The rest of the world is starving to death. Americans complain about affordability, but until I see them living in 400sqft apartments permanently, I simple don’t believe them. It’ll take 20 years of inflation to get Americans as poor as Europeans, and by then they’ll be eating roots to survive while Americans are finally forced to buy shitboxes.
As a resident immigrant from Europe to the USA, I like reminding people of this stuff.
Scrolled through most comments and I don’t think I saw this, but I think part of the problem with the lack of affordable cars in the US comes from the same root of another ongoing crisis which is the lack of affordable college education, part of which is just how easy it is to borrow money. Why make cars cheaper when regular people CAN get an extra long $1000/month payment schedule?
Maybe if shackling oneself to excessive debt was harder to do in the US, providers of goods and services would have to meet the consumers where they are.
I don’t think affordable college education does much to solve anything.
College education in Barcelona, for example, is essentially free. This turns a field like Engineering into something with an 8% pass rate, and upon graduation, you can hope for a job where you make 15k a year. Yes you read that right.
Perhaps fewer people need to go college to study absolute stupidities while piling on debt for a degree that will never turn into jobs and instead learn trades.
I interface with engineers (EE) in Europe several times a week. They don’t make 15K in dollars or Euros. They do a lot better than that. And you quoted 8% pass rate? We were certainly much higher than yet, looking at my classmates.
Are recent college grads even considered for those jobs?
8% pass rate. I’d know, as I went through it.
Starting engineer salaries are 15k. Maybe it’s 20k by now but the point is equally valid.
I was offered 12k annual starting salary as an IE in 2010. IE over there was the 2nd hardest engineering degree.
Are you talking with lots of 22 year old European engineers? Unlikely.