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Finding cheap new cars is getting harder, car experts say.
Consider this: According to Kelley Blue Book, there was only one model — the Mitsubishi Mirage — with an average new-vehicle transaction price under $20,000 in July data. By comparison, five years ago there were a dozen cars that fit that pricing metric.
Brian Moody, executive editor of Kelley Blue Book, said a barometer of $20,000 or less is an unofficial price threshold for an affordable new car.
“Cheap new cars aren’t as plentiful as they used to be,” Moody said.
Of course, transaction prices don’t tell the whole story, experts say. The price records what the average buyer pays — a variable that depends on factors such as car dealership markups and promotions and any add-ons the buyer chooses at the time of purchase.
In addition to Mitsubishi, manufacturers such as Kia, Hyundai and Nissan currently sell vehicles with sticker prices below $20,000 for base models, Moody’s said.
But Tom McParland, owner of Automatch Consulting, which provides car-buying services to consumers, said the list has shrunk in size over the past five years or so.
“Whether you’re buying new or used, this sub-$20,000 affordable segment is challenging,” he said.
“Americans don’t like no character”
Paul Waatti, an industry analyst with market research firm AutoPacific, said that as recently as a few years ago, consumers could find entry-level cars starting at $15,000.
Experts say the current lack of options is due to a combination of factors.
These include consumer preferences: people tend to want models With more features, Watt said.
“Culturally, Americans don’t like any features that aren’t in the car,” such as automatic climate control, car playback screens and parking sensors, said Joseph Yoon, a consumer insights analyst at the auto website Edmunds.
Automakers know that’s true and use it to their advantage in marketing, Varty said.
“Automakers obviously want to be able to tell people they’re offering an affordable car, and they can do that with messaging,” he added, “but at the end of the day, they don’t make a lot of low-priced models. “.
Instead, automakers will produce more high-end models with features consumers want, Yin added.
In fact, sales of vehicles in the luxury segment increased, Moody’s said. They now account for about 20% of total new vehicle sales, up from about 10% before the pandemic to 13%, he said.
Five years ago, there were 12 cars with an average selling price of more than $100,000; today there are 32, according to Kelley Blue Book data. Both statistics exclude “super exotics” from the likes of Ferrari, Lamborghini and Rolls-Royce.
Inflation for new (and used) cars has also spiked during the pandemic, driving up car prices. Materials and supplies have become more expensive, pushing up production costs for auto companies, and those higher costs are at least partially passed on to buyers, Wattie said.
Higher interest rates could also keep would-be buyers out of the car market right now, experts say.
Since buyers who typically buy the cheapest cars tend to be on a tight budget, their absence could lead to higher average purchase prices, they said.
The average new car purchase price is about $48,000 today, up from about $30,000 in 2012, according to Kelley Blue Book.
4 Tips for Consumers to Find Affordable Cars
Here are some general tips to help consumers find a car at an affordable price.
1. Really know your budget
Most car buyers use monthly payments to conceptualize the price of a car.
However, McParland said consumers should use an online auto loan calculator to understand their overall budget before shopping. Otherwise, it’s hard to know if you’re getting a good deal, he said.
affim car loan calculator Let consumers work backwards by entering a monthly payment (along with other estimated information like loan term and interest rate) that fits their budget. Output: The total price of the vehicle that the buyer can afford.
“It’s probably the best step any client can take,” McParland said.
2. Look beyond your local market
Casting a wide net in the car search process can generate more potential inventory and leverage with dealers, McParland said. He added that some markets are “better than others” and that even an observation after an hour or two “is likely to get you a more competitive deal”.
3. Get written prices in advance
Confirm the car’s price in writing with the dealership before you walk in, says McParland. The refusal to do so was a red flag, he said.
“It’s the code word for ‘we’re going to blackmail you,'” he said.
4. Purchase financing
Don’t rely on dealer financing offers.
Dealers can cash in on consumers by offering higher-than-necessary rates, experts say. That’s why it’s a good idea to get pre-approved for an auto loan — perhaps from a local bank, credit union or online lender — before setting foot in a dealership, they say.
McParland said the offers, which can provide dealers with better prices, are especially useful for buyers with credit scores below 700, who are less likely to qualify for the best deals.
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