Affordability Is In Decline. Automakers Have All But Abandoned Budget Vehicles.

‍The inexpensive car's demise

Sales of new cars under $25,000 have decreased by 78% in the last five years.

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The Cox Automotive Industry Insights team recently conducted a new analysis that compared total new-vehicle sales between December 2017 and December 2022, five years later. It discovered that Americans nowadays have drastically fewer options when looking to buy a new car under $25,000. (Cox Automotive is the parent firm of Kelley Blue Book.)

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36 models with a $25,000 or less price tag were produced by automakers in December 2017. Five years later, they only constructed ten.

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Towards the end of 2017, about 13% of new automobile sales were of vehicles priced under $25,000. In December of last year, less than 4% of new cars sold were in that price range.

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Manufacturers have all but given up on the market for inexpensive goods. America's most affordable new automobile for a while was the Chevy Spark, which was discontinued in 2022. The Hyundai Accent also did so.

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With this change, American car buyers are now limited to three subcompact vehicles: the Kia Rio 000270 (+0.93%), Nissan Versa NSANY (+1.15%), and Mitsubishi Mirage MMTOF (+2.83%). They are also the only three automobiles still available on the market that, with delivery fees, cost less than $20,000.

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Low-income purchasers are pushed into the secondhand car market by the demise of the low-cost automobile. Individuals who are trying to repair their credit are also being squeezed out. Buyers with subprime credit ratings made up just 5.2% of the market in December 2022. Subprime purchasers were 13.9%.

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Sales Of More Pricey Vehicles Increase

Throughout this time, sales of new cars costing more than $60,000 have surged, increasing by 163%.

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61 vehicles with sticker values of $60,000 or more were available for purchase in December 2017 from automakers. They presented ninety in December. More than 25% of sales in December 2022 were of vehicles costing more than $60,000. They made up less than 8% five years ago.

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Several people wear posh badges. About a quarter of all new auto sales in America this month were made by buyers of luxury-badged vehicles, a record-high.

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While some of them sport the logos of budget automakers, the majority of Americans can hardly afford them. The Ford F, 2.44% F-150, Chevrolet Silverado, and Ram 1500, the country's top three selling trucks, all come in a variety of trim levels with starting costs that start at or above $60,000; some even go up to $60,000 with additional options.

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Little Glimmers Of Optimism

The average new car's final sale price decreased marginally last month. The average new car still costs close to a record amount; as of January, it was $49,388.

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In terms of how long it takes Americans to pay off a new automobile, cars have also become more affordable. The new car market may experience declining pricing through a significant portion of 2023, according to analysts, as automakers recover from a global microprocessor shortage and find themselves able to create so many vehicles that they must mark them down to sell them.

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Nonetheless, some have talked openly about maintaining stocks lower than they were prior to the supply chain problem in order to avoid having to provide significant incentives.

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The strain on Americans pushed out of the new automobile market by the industry's move toward high-income purchasers has been lessened by the decline in used car costs.