DETROIT — Dana Eble and Tyler Marcus have been sharing their 2019 Chevrolet Trax for several years, but the young married couple is now searching for a second vehicle. However, entering today’s automotive market has left them uncertain about what fits within their budget.
“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.
Vehicle ownership has traditionally been a cornerstone of American life. Yet as manufacturers reduce production of budget-friendly models to focus on customers willing to purchase large pickup trucks and SUVs, shoppers are experiencing price shock while already dealing with persistent inflation effects.
According to Friday’s Labor Department data, consumer costs climbed 3.3% in March, marking the largest annual jump since May 2024, while new vehicle prices increased 12.6% compared to the previous year.
Today’s new vehicles command an average price tag of almost $50,000, representing a 30% increase over six years, with typical monthly payments — calculated on 10% down payment and six-year financing — reaching $775. Bargain hunters face slim pickings: vehicles priced below $30,000 now represent approximately 13% of inventory, plummeting from 40% five years earlier, according to CarGurus data.
In response, purchasers are extending payment terms. Buyers selecting seven-year financing now account for over 12% of transactions, rising from nearly 8% last year, J.D. Power reports. These extended contracts ultimately cost more due to accumulated interest charges.
“The ability to buy transportation is still out there. The question is just, what do you get for your money?” Charlie Chesbrough, a senior economist at Cox Automotive, said.
Escalating vehicle costs are adding to broader affordability concerns across American society. Consumers, particularly younger demographics, report feeling that essential expenses including housing, groceries, utilities and childcare are becoming more costly while salaries remain stagnant.
This creates a challenging situation for Republicans approaching this year’s midterm elections, particularly as the Iran conflict has driven up gasoline prices, making driving even more expensive.
Price tags have climbed steadily since manufacturers realized Americans would pay premium prices for larger, costlier SUVs and pickup trucks that generate higher profits per transaction. Companies have mostly eliminated smaller, economical sedans from their lineups.
This trend particularly affects American automakers; average transaction prices for vehicles from Ford Motor Co., General Motors and Stellantis (Jeep’s parent company) have generally increased more than those from Asian manufacturers Honda, Hyundai, Mazda and Subaru.
Automakers also strategically bundle desirable features into higher-priced trim packages that entice customers toward vehicles exceeding their planned budgets, explained David Undercoffler, CarGurus’ head of consumer insights.
Modern safety technologies — including lane-keeping assistance, automatic emergency braking, blind-spot monitoring, and collision alerts — contribute to vehicle costs. Federal regulations mandate certain features like backup cameras.
The COVID-19 pandemic drove automotive prices higher when production declined, impacting both new and pre-owned markets. While manufacturing rebounded, additional supply chain problems and tariffs continued affecting costs. Government statistics reveal car insurance premiums have jumped 55% compared to six years ago, before the pandemic, forcing more Americans to go uninsured. Vehicle maintenance costs average 48% higher.
New car purchasers earning under $100,000 comprised 37% of buyers last year, dropping from 50% in 2020, Cox Automotive data shows.
Several manufacturers have recognized affordability issues. Ford announced in February it would offer multiple vehicles under $40,000 by decade’s end. GM has highlighted Buick and Chevrolet models, including the Trax, as budget-friendly alternatives.
Chesbrough believes consumers sometimes maintain unrealistic expectations.
“There are vehicles out there for less than $30,000. What everybody wants is the mid-sized SUV with leather seats and the sunroof for $25,000, and that’s not available,” Chesbrough said.
These shoppers, he noted, are moving toward the pre-owned marketplace.
However, buyers transitioning to used vehicles discover limited affordable inventory there as well. Used vehicles under $30,000 decreased from 78% in 2021 to 69% in February, CarGurus reports. February’s average used vehicle sold for approximately $25,000, with typical used car payments hitting $560.
Used car availability faces pressure from multiple factors. Cost-conscious consumers are keeping vehicles longer — nearly 13 years on average currently, extending 18 months beyond a decade ago, Bureau of Transportation Statistics data indicates. Additionally, declining lease popularity means fewer two- and three-year-old vehicles entering the market when leases conclude.
J.D. Power calculates that consumers could spend up to $140 less monthly on lease payments compared to average financing commitments, providing a beneficial option especially for drivers with predictable annual mileage. However, experts acknowledge affordability remains challenging.
Sam Dykhuis, 27, from Chicago, recently needed her first car when beginning employment as a United Airlines scheduler. She sought something used under $20,000, ultimately paying slightly more for a 2021 Mazda CX-5. To minimize costs, she used savings for an outright purchase and pays insurance semi-annually for additional savings.
Still, “My paycheck went down and my expenses went up,” Dykhuis said. “Certainly, I have to be more just on top of it than I was previously.”
Eble, 30, and Marcus, 31, say they admire nice vehicles but don’t consider themselves “car people” and hope this simplifies their search. Nevertheless, finding something within their $20,000 to $30,000 range may prove more difficult than previously.
They’re evaluating options including a newer Trax, Mazda models, or possibly an electric vehicle. New EVs typically cost more initially, but consumers can achieve long-term savings. The used EV market will soon see an influx of two- or three-year-old electric vehicles previously leased when federal incentives were more generous.
Like Dykhuis, they’re considering purchasing their next vehicle outright to avoid additional monthly obligations.
“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.
