Overview of What Happened to the Affordable Car?
This episode of The Journal examines why new cars have become so expensive in the U.S., why many consumers are keeping older vehicles longer, and how automakers have responded by shifting toward larger, higher-margin trucks, SUVs, and subscription-based features. Through the story of a carpenter still relying on a 1993 Toyota truck, the episode shows how the “affordable car” has become increasingly hard to find.
The Rise of Expensive Cars
New-car prices have climbed sharply
- The average price of a new car is now around $50,000, roughly double what it was about 25 years ago.
- It’s not just the sticker price:
- Financing costs are higher
- Insurance is more expensive
- Repairs and maintenance add up
- Auto loan rates have also risen, making monthly payments harder to manage.
Older cars are staying on the road longer
- The average age of cars on U.S. roads is now about 13 years.
- Many drivers are delaying replacement because new vehicles are financially out of reach.
- The episode opens with Josiah Johnson, a carpenter in Southern California, who uses a 1993 Toyota T100 as a work truck and has little interest in buying a new one.
Why Automakers Moved Away from Cheap Cars
The industry shifted toward bigger, more profitable vehicles
- Car companies used to offer a wider spread of affordable models, including compact sedans and hatchbacks.
- After the 2008 financial crisis, many manufacturers cut slow-selling, lower-margin vehicles.
- They increasingly focused on:
- Pickup trucks
- SUVs
- Crossovers
- These vehicles can be sold at much higher prices while costing only modestly more to produce, which improves profit margins.
Bigger vehicles became the norm
- Trucks and SUVs have grown larger over time.
- More size often means more features, which further pushes up prices.
- The episode notes that even “budget” or “compact” utility vehicles are now much pricier than comparable sedans used to be.
The Pandemic Made the Problem Worse
Supply shortages pushed prices up
- During COVID-19, supply-chain disruptions reduced car availability.
- With limited inventory, automakers pulled back on discounts.
- Prices rose and then largely stayed elevated even after shortages eased.
How the Market Is Changing Now
Fewer people are buying new cars
- The market has slowed, but not collapsed.
- Automakers can still make money because they sell fewer vehicles at much higher margins.
The auto industry is leaning on new profit streams
- Certified used cars have become more important.
- Subscriptions are becoming a growing business model:
- Heated seats
- Self-driving features
- Remote start/unlock functions
- Dash cam access
- The episode highlights how software-connected cars are enabling manufacturers to charge recurring fees for features that used to be one-time purchases.
Can Affordable Cars Return?
Automakers say they still need entry-level options
- Industry executives generally acknowledge the need for affordable vehicles.
- Companies like Hyundai, Nissan, Toyota, Honda, Ford, Stellantis, and GM still have or are planning lower-priced models.
- GM also sells smaller, lower-cost SUVs built in Korea, where labor costs are lower.
New startups are testing ultra-basic vehicles
- The episode features Slate Auto, a startup making a stripped-down electric truck:
- Two seats
- Crank windows
- No radio
- Minimal features by default
- Buyers can add features later, but only by paying extra.
- The truck appeals to consumers tired of expensive, tech-heavy cars, but its long-term success depends on whether enough people actually buy it.
Main Takeaways
- Affordable new cars are rarer than they used to be.
- The auto industry makes more money from bigger, pricier vehicles than from cheap sedans.
- Higher interest rates, insurance costs, and inflation have made car ownership more expensive overall.
- Many Americans are keeping cars longer, and a new car is increasingly becoming a luxury purchase.
- The industry may still offer budget vehicles, but the market is clearly tilted toward higher-end models and recurring revenue.