For some Americans, rising costs put a new car out of reach

As Dana Eble and Tyler Marcus search for a second car to supplement their 2019 Chevrolet Trax, they’re confronting a harsh reality facing many Americans today. “I just keep seeing a lot of different aspects of life getting more expensive, and it’s harder,” said Eble, who works as an account manager for a public relations agency.

The young married couple’s experience reflects a broader trend in the U.S. automotive market, where the dream of car ownership is increasingly colliding with financial constraints. While Americans have long viewed car ownership as essential to personal freedom and economic mobility, the landscape has shifted dramatically in recent years.

New data shows consumer prices rose 3.3% in March, marking the largest yearly increase since May 2024. New car prices specifically jumped 12.6% from a year ago, according to the Labor Department’s latest report. This surge has pushed the average new vehicle price to nearly $50,000—a staggering 30% increase in just six years.

The affordability crisis becomes even more apparent when examining monthly payments. With a typical 10% down payment and a 6-year loan, the average monthly car payment has reached $775. Budget options are increasingly scarce, with vehicles listing under $30,000 now comprising just 13% of the market, down dramatically from 40% five years ago, according to data from CarGurus.

Consumers are attempting to manage these costs by extending loan terms. J.D. Power reports that 7-year auto loans now account for more than 12% of all sales, up from nearly 8% a year ago. While these longer terms reduce monthly payments, they ultimately cost buyers more through additional interest payments.

“The ability to buy transportation is still out there. The question is just, what do you get for your money?” said Charlie Chesbrough, senior economist at Cox Automotive.

The automotive industry’s pricing trends are contributing to broader concerns about affordability across American life. Consumers—particularly younger generations—increasingly report feeling squeezed as everyday expenses like housing, food, utilities, and child care outpace wage growth.

This economic pressure creates political vulnerability heading into this year’s elections, especially as recent Middle East tensions have driven up fuel prices, making vehicle ownership even more expensive.

Several factors have contributed to rising vehicle costs. Automakers have pivoted toward larger, more profitable SUVs and pickup trucks while phasing out smaller, more affordable sedans. This strategy is especially evident among domestic manufacturers—Ford, General Motors, and Stellantis—whose average selling prices generally exceed those of Asian brands like Honda, Hyundai, Mazda, and Subaru.

Manufacturers have also become adept at packaging desirable options in premium trim levels, enticing consumers to spend more than initially planned. “Consumers often walk into dealerships with one budget in mind but leave having spent considerably more,” explained David Undercoffler, head of consumer insights at CarGurus.

Advanced safety features—including lane-keeping assistance, automatic emergency braking, blind-spot monitoring, and collision warnings—further increase vehicle costs. Some of these features are now mandated by federal regulations, such as rearview cameras.

The COVID-19 pandemic exacerbated price pressures when production declined, affecting both new and used markets. Although production eventually recovered, ongoing supply chain disruptions and tariffs continue to impact prices. Meanwhile, car insurance costs have soared 55% compared to pre-pandemic levels, and repair costs are up 48% on average.

These trends have reshaped the buyer profile. Cox Automotive reports that the proportion of new car buyers earning less than $100,000 annually fell to 37% last year, down from 50% in 2020.

Some manufacturers have acknowledged the affordability concerns. Ford announced plans in February to offer several vehicles priced under $40,000 by the end of the decade. GM has highlighted more affordable options from Buick and Chevrolet, including the Trax.

Many budget-conscious consumers are turning to the used market, but finding limited relief there as well. The share of used vehicles priced below $30,000 dropped from 78% in 2021 to 69% in February 2024. The average used vehicle now sells for approximately $25,000, with monthly payments averaging $560.

Several factors contribute to the tightening used car inventory. Consumers are keeping vehicles longer—nearly 13 years on average, an increase of 18 months compared to a decade ago, according to the Bureau of Transportation Statistics. Additionally, declining popularity of leasing means fewer late-model vehicles entering the secondary market.

For buyers like Sam Dykhuis, 27, of Chicago, creative solutions are necessary. When starting a new job as a scheduler for United Airlines, she needed her first car. After searching for a used vehicle under $20,000, she ultimately paid slightly more for a 2021 Mazda CX-5, using savings to purchase it outright rather than financing.

As Eble and Marcus continue their search in the $20,000 to $30,000 range, they’re considering various options including a newer Trax, a Mazda, or possibly an electric vehicle. Though EVs typically cost more initially, they can offer long-term savings. The couple is also contemplating buying outright to avoid monthly payments.

“It feels like if anything happens out of our control… it just seems so much more difficult to figure out how to orient our finances,” Eble said, capturing the uncertainty many Americans feel in today’s challenging automotive market.