The Auto Market Is a Weird One at the Moment

For modest-income buyers, new cars are out of reach
By Newser Editors and Wire Services
Posted Apr 16, 2022 12:55 PM CDT
For Modest-Income Buyers, New Cars Are Out of Reach
Natalia Ponce De Leon, owner of Custom Window Furnishings, sits on the back of her 9-year-old Toyota RAV4 after visiting with a client in Delray Beach, Fla. Buying a new vehicle just isn't an option for her in the current market.   (AP Photo/Marta Lavandier)

Two years after the pandemic tore through the economy, America’s auto market looks something like this: Prices are drastically up. Supply is drastically down. And gasoline costs drastically more. The result? A widening disparity between the richest buyers and everyone else, per the AP. The most affluent buyers keep plunking down big money for new vehicles, including the least fuel-efficient among them—trucks, SUVS, large sedans. As for the rest of America, millions are feeling increasingly priced out of the new-vehicle market. They are competing instead for a shrunken supply of used autos, especially smaller, less expensive ones that consume less fuel. The jump in pump prices since Russia’s invasion of Ukraine has only intensified their urge to keep costs down.

Among all purchases of new autos last month, nearly 79% were trucks and SUVs. A decade ago, that proportion was just 52%. And that’s despite a whopping 22% jump in the average price of a new car since the pandemic struck two years ago—to more than $46,000, as of December. Based on March prices and interest rates, the monthly payment on an average new vehicle would be $691—far beyond the reach of what a household with a median gross income of $65,732 should spend, according to calculations by Cox Automotive and Moody’s. Ivan Drury, a senior manager at the auto site, has been surprised by the demand among affluent buyers for high-priced new vehicles.

“I can’t imagine a situation in which we’ve had so many people willing to spend so much money,” Drury said. “It’s just abnormal for someone to go out and spend (sticker price) or above. I can’t think of any other time period unless it was on specific models. And this is every car on the road.” Left largely out of that pool, buyers of more modest means have been vying for the most fuel-efficient used vehicles—and forcing up their prices. At auctions where dealers buy many of their vehicles, the average price of a 2-to-8-year-old compact car rose 1.1% during the past three weeks to an average of $12,560. That's an annual rate of nearly 20%. The price of older cars is up even more, according to data compiled by Black Book, which monitors such prices.

(More new car stories.)

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