Original MSRP on the 2004 Camry was ~$18k. The 2024 Camry is ~$25k (fair market value ~$29k), so at least the Camry has gotten cheaper or shayed the and relative to inflation. Cars have gotten much better in the meantime as well.
Since 2020, new car prices have risen by 30 percent
That’s a bit unfair though. There was a massive supply shortage in 2020 as car manufacturers reduced production fearing an economic downtown, then a difficulty increasing production due to COVID-related supply line disruption. Since then, EVs have gotten really popular, and their prices have skyrocketed.
So they have picked the most extreme possible start and failed to point out changes in purchasing preferences (i.e. more are buying from the more expensive end of the spectrum).
They do get into this later though.
In November 2019, the average transaction price for a new vehicle was $38,500. In November of 2023, that figure jumped to $47,939.
So Americans prefer to buy more expensive cars. Cheaper cars do exist as pointed out in the article, but there’s apparently not as much demand for them.
Americans needed an annual income of at least $100,000 to afford a car
I’m guessing this is based on the average selling price of a car. Let’s also assume loan rates are 5-6%, they’ll put $0 down, and yearly income is assuming 10% goes to the car payment. I’ll use this calculator for loan costs using data for my state (~9% sales tax, $2500 fees). I’ll estimate other costs below.
Let’s look at some options (only going with “fullsize” sedans and a crossover):
Toyota Camry - fair value ~$29k - $547.27-560.65/month, income range $65k-67k
Kia Forte - fair value ~$22.5k - $424.60-434.99/month, income range ~$52k
Subaru Crosstrek - fair value ~$28k - not bothering to calculate, probably $60-65k
Assuming 30mpg, 14k miles per year, and $3.09/gal gas (average taken from here), we get $1440/year in gas, or $14.4k in additional income. There are cheaper cars and more efficient cars, this is just a sample of popular cars.
So to afford gas and a car payment on a new car on 10% of your income, you’d need $66.5k-80k, not $100k. After the first 5 years, that decreases quite a lot, and your cost for maintenance is probably way less than your old car payment.
I’m not factoring in insurance prices, which depend heavily on region, age, driving record, etc.
That said, I personally have never and probably will never buy new, I prefer to find a good deal on a used car and keep it to 200k+ miles. I think many people at the lower end of the income spectrum do the same, so basing a budget around a car payment is really silly. So the actual minimum is probably more like $40-50k, if you buy a high quality used car, get liability insurance, and do the easier repairs yourself.
including that automakers are increasingly focusing on the production of expensive SUVs and trucks while dropping smaller, cheaper vehicles that would cost $20,000 or less.
This is due to customer demand, as well as stupid regulations that make SUVs and trucks cheaper for auto makers to make. If we fix the laws to not treat consumer trucks and SUVs differently, we’ll see prices for those cars increase and demand for smaller cars increase as well.
This all started with light trucks getting lower efficiency standards than cars, and SUVs being classified as light trucks, which means SUVs have lower R&D costs vs sedans due to not needing to worry about efficiency as much. So SUVs can be cheaper than they would be if they were regulated as cars.
Alternative perspective:
10% of new cars are still below $30k despite inflation. $30k today would be ~$18k 20 years ago.
Original MSRP on the 2004 Camry was ~$18k. The 2024 Camry is ~$25k (fair market value ~$29k), so at least the Camry has gotten cheaper or shayed the and relative to inflation. Cars have gotten much better in the meantime as well.
That’s a bit unfair though. There was a massive supply shortage in 2020 as car manufacturers reduced production fearing an economic downtown, then a difficulty increasing production due to COVID-related supply line disruption. Since then, EVs have gotten really popular, and their prices have skyrocketed.
So they have picked the most extreme possible start and failed to point out changes in purchasing preferences (i.e. more are buying from the more expensive end of the spectrum).
They do get into this later though.
So Americans prefer to buy more expensive cars. Cheaper cars do exist as pointed out in the article, but there’s apparently not as much demand for them.
I’m guessing this is based on the average selling price of a car. Let’s also assume loan rates are 5-6%, they’ll put $0 down, and yearly income is assuming 10% goes to the car payment. I’ll use this calculator for loan costs using data for my state (~9% sales tax, $2500 fees). I’ll estimate other costs below.
Let’s look at some options (only going with “fullsize” sedans and a crossover):
Assuming 30mpg, 14k miles per year, and $3.09/gal gas (average taken from here), we get $1440/year in gas, or $14.4k in additional income. There are cheaper cars and more efficient cars, this is just a sample of popular cars.
So to afford gas and a car payment on a new car on 10% of your income, you’d need $66.5k-80k, not $100k. After the first 5 years, that decreases quite a lot, and your cost for maintenance is probably way less than your old car payment.
I’m not factoring in insurance prices, which depend heavily on region, age, driving record, etc.
That said, I personally have never and probably will never buy new, I prefer to find a good deal on a used car and keep it to 200k+ miles. I think many people at the lower end of the income spectrum do the same, so basing a budget around a car payment is really silly. So the actual minimum is probably more like $40-50k, if you buy a high quality used car, get liability insurance, and do the easier repairs yourself.
This is due to customer demand, as well as stupid regulations that make SUVs and trucks cheaper for auto makers to make. If we fix the laws to not treat consumer trucks and SUVs differently, we’ll see prices for those cars increase and demand for smaller cars increase as well.
This all started with light trucks getting lower efficiency standards than cars, and SUVs being classified as light trucks, which means SUVs have lower R&D costs vs sedans due to not needing to worry about efficiency as much. So SUVs can be cheaper than they would be if they were regulated as cars.
Regardless, this article is quite poor imo.