Low-priced New Vehicle Buyers Are Missing in Action

Steph Willems
by Steph Willems

Once a bracket where most desirable vehicles lived, the sub-$20,000 price range is not the hot neighborhood it once was. The ever-upward creep of new vehicle MSRPs increasingly places most vehicles above that marker, and shifting consumer trends haven’t helped expand its ranks.

According to data from J.D. Power, 2018 has seen a rapid exodus from the cheap seats, with retail volume from the $20k-and-under crowd sinking 20 percent since the start of the year. Big spenders, on the other hand, are gobbling up $80,000-plus vehicles at a rapid clip.

Vehicles in that upper bracket only make up 1 percent of new retail volume at franchised dealers, explained Tyson Jominy, head of automotive data and analytics consulting at J.D. Power. Still, despite all of the rarified air, the volume of vehicles with an average transaction price above $80k rose 25 percent since the start of the year.

“Suddenly, high-end models are gaining this year,” Jominy said. “It’s jumped up before at times, but was contracting for the past two years.”

(Keep in mind that J.D. Power’s methodology excludes Tesla sales. – Ed)

In this price bracket, numbers are fairly volatile. Gains and losses can often be attributed to the release of desirable new models or the discontinuation of popular ones, but this year is strange. “Some of this $80k-plus growth is driven by new product … but demand for some older models is growing,” Jominy said.

More interesting is the low end of the market — vehicles with ATPs below $20k. Some 400,000 American buyers bled out of that category this year. While the vast middle ground ($20-$80k) has seen volume increases throughout the price range (but concentrated away from the low end), the buyers flowing out of the entry-level bracket seem to have vanished.

One would think that the recent or impending death of many small car models, the growing popularity of crossovers, a steady rise in interest rates, and fewer zero-interest loans would compel low-end shoppers to either upsell themselves and finance a pricier vehicle over a longer term, or hit the used market. Unless they’re headed to BHPH lots, however, that doesn’t seem to be happening.

“It’s interesting — they’re not going over to used,” said Jominy. “Sales are perfectly flat compared to last year.” The sub-$20k range represents 55 percent of all used vehicles sold at franchised dealers, he added.

Buyers looking for a low-mileage off-lease compact car face steep price increases due to high demand and increasing scarcity. The average price of a three year-old compact rose over 7 percent in September, year over year. Midsize sedans saw the second-highest price increase among all segments.

The price point where volume switches from contraction to growth is $21,000, Jominy said, but the biggest gains are occurring at higher price points — which isn’t where this generally younger cohort would end up. Where have these buyers gone? While some surely dug deeper and others found a used vehicle somewhere, others may have decided to forgo buying altogether. It’s possible we’ve begun to see the impact of new ownership alternatives (car sharing, ride-hailing) aimed primarily at urban Millennials. Still, the data doesn’t exist to fully back that theory.

[Image: Hyundai]

Steph Willems
Steph Willems

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  • Carrera Carrera on Oct 11, 2018

    I like cars like most guys on this site but I am a realist too. I have a 92 mile commute daily. As soon as it started I traded in my 17 mpg paid pick up truck which ran great but needed 1500 dollars in maintenance work ( tires, timing belt, wheel bearings) for a 2 year old, soul sucking loaded Corolla S plus with a manual transmission. The Corolla had 9,000 miles on it and I got it for $14,000 with a 2.9%. Since it was certified, I got 1 year free maintenance. Could I have afforded a slightly used BMW 328 or a New Accord? Of course, but I don't need a 25,000 plus vehicle to go to work and back for 92 miles. The Corolla gets 40 mpg, it is the definition of reliable and extremely cheap to maintain. It isn't sexy, but it isn't a clown car either. It does the job.

    • See 5 previous
    • Remusrm Remusrm on Oct 11, 2018

      @Carrera because its easy to get payments on a flashy car and pay forever on it, or lease and pay forever to rent!

  • Mopar4wd Mopar4wd on Oct 11, 2018

    Yeah I did 110 miles a day for a while in compacts and subcompacts. It works fine and the economics are great but it wears on you compared to the AWD wagons and now comfy large sedan that I have commuted with since.

  • Dave M. The Outback alternates between decent design and goofy design every generation. 2005 was attractive, 2010 goofy. 2015 decent. 2020 good, but the ‘23 refresh hideous.Looking forward to the Outback hybrid in ‘26…..
  • Lorenzo Subaru had the ideal wagon - in 1995. The Legacy Outback was a straight two-box design with rear quarter and back windows you could see out of, and was available in brown with a 5-speed manual, as God and TTAC commenters intended. It's nice they're not raising prices, but when you've lost the plot, does it matter?
  • Bkojote Remember a month a go when Cleveland wanted to create a more walkable Cleveland and TTAC's 'BIG GOVERNMENT IS THE PROBLEM' dumbest and dullest all collectively crapped their diapers? Here's the thing- look on any American highway and it's littered with people who don't /want/ to be driving or shouldn't be. Look at every Becky on her phone during the morning commute in her Tucson, look at every Brad aggro driving his 84 month loan GMC. Hell look how many drivers nowadays can't even operate a headlight switch. You expect these people to understand a stoplight? In my neighborhood alone 4 people have been rear ended at lights from someone on their phone. Distracted driving over the past 10 years has spiked, and it's only going to get worse unless Becky has an alternative, because no judge is going to pull her license when 'she needs it to get to work!' but heaven forbid she not check fb/tiktok for 40 minutes a day.
  • Scott Shouldn't the The Italian Minister for Business be criticizing The Milano for being too ugly to be Italian?Better use of resources doing that....
  • Steve Biro Frankly, while I can do without Eyesight and automatic start-stop, there is generally less B-S with Subarus in terms of design, utility and off-road chops than with many other brands. I just hope that when they adopt Toyota’s hybrid system, they’ll also use Toyota’s eCVT.