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In ‘shift,’ some car shoppers shun top-of-the-line models, analyst says. How to find an inexpensive new vehicle
Published Mon, Sep 11 20233:29 PM EDT
Key Points
- Car shoppers are showing more interest in vehicles selling under $50,000, according to car site Edmunds. That reverses a recent trend that saw shoppers splurging on higher-end models with more features.
- But cars under that price point can be harder to find.
- Consumers looking for a good value can take a few general steps to save money at the dealership.
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Patrick T. Fallon | Bloomberg | Getty Images
During the pandemic, shoppers splurged on higher-end new cars. Now, given the current high car costs and interest rates, drivers are shifting their focus to less expensive models. Finding one, however, might not be easy.
More shoppers are opting for vehicles that fall in the $45,000-$50,000 range, the price point of mid-to-high-trim three-row SUVs, said Joseph Yoon, an Edmunds consumer insights analyst.
That shift shows in so-called “days to turn” numbers, which measure how long cars are in dealer inventory before being sold. Vehicles selling for under $50,000 currently linger for just 26 days on the lot, on average, compared to 40 days for those with a higher sticker price, according to Edmunds data.
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“We’re seeing the overall effect of the economy at play here,” said Yoon.
“People have stopped going for top-of-the-line cars and are going for mid-trim cars,” he added, “That’s where we’re starting to see the shift.”
Even so, the average transaction price for a new car was $47,941 in August, up 0.8% from July and up 1.6% from a year earlier, Edmunds found. Interest rates for new-vehicle financing also climbed 7.4% in August, marking the highest rate since 2008.
As a result, the average monthly payment for new vehicles reached a record $738.
Models averaging under $20,000 are rare
Drivers in search of a new ride are likely to quickly discover that it’s harder to find cheap new cars these days.
The $20,000-or-below barometer is a sort of unofficial price threshold for an affordable new car, said Brian Moody, executive editor for Kelley Blue Book.
“There aren’t as many inexpensive new cars as there used to be,” Moody said.
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In fact, only one car model had the average new-vehicle transaction price below $20,000 in July, according to Kelley Blue Book data: the Mitsubishi Mirage.
Consumers looking for a car that sells for a price within the $20,000-$50,000 threshold are likely to find more options. Of 35 makes, 14 — Buick, Chevrolet, Chrysler, Fiat, Honda, Hyundai, Kia, Mazda, Mini, Mitsubishi, Nissan, Subaru, Toyota and Volkswagen— had average transaction prices under $50,000 in July, according to Kelley Blue Book.
Transaction price doesn’t tell the full story, of course, experts said. That price records what the average buyer pays — a variable that depends on factors such as markups and promotions by car dealers and any add-ons selected by buyers at the time of purchase.
‘Americans don’t like not having features’
Consumers were able to find entry-level vehicles with a $15,000 starting price as recently as a few years ago, said Paul Waatti, an industry analyst at market research firm AutoPacific.
The dearth of cheaper options today is due to a multitude of factors, experts said.
Among them is consumer preferences — people tend to want models with more features, Waatti said.
“Culturally, Americans don’t like not having features in their car,” such as automatic climate control, a car play screen and parking sensors, said Yoon.
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Auto manufacturers know this to be true and use it to their advantage in marketing, Waatti said.
“Automakers obviously want to be able to tell that they’re offering an affordable vehicle and they can do that in messaging,” he added. “But when it comes down to it, they’re not building many of those lower-price models.”
Instead, automakers will make more of the higher-end models with features that consumers want, added Yoon.
In fact, car sales in the luxury market segment have increased, Moody said. They now account for about 20% of total new car sales, up from roughly 10% to 13% before the Covid-19 pandemic, he said.
When it comes down to it
