Attention, Plebs: New Cars Are Becoming Prohibitively Expensive

Matt Posky
by Matt Posky
attention plebs new cars are becoming prohibitively expensive

As new vehicle prices continue to climb, many wonder how high MSRPs can go before the public decides to take a pass — assuming they haven’t already. Sales growth is slowing, even in seemingly bulletproof markets like China. Even before this ominous backdrop unfurled, dealers were making noise about new car prices that had grown overly ambitious, claiming they couldn’t endure another period of sustained economic hardship.

Edmunds estimates that the average transaction price of a new vehicles reached $36,495 in December 2018 — a 3 percent increase compared to December of 2016 and a 13 percent increase compared to December of 2012. Taking that knowledge, Road & Track compiled a broader picture of the new-car market and where it might be going.

Spoilers ahead if you don’t want the unpleasant non-surprise ruined.

From Road & Track:

It’s not just in our heads, either. Cars have actually gotten more expensive over the past 10 years, and not just by a little bit. Edmunds says that, on average, new cars sold for more than $36,000 in February, up 29 percent from the same month in 2009. Meanwhile, median household income in the U.S. has only risen to around $62,000, an increase of about six percent over the past decade. Even more cringeworthy? Interest rates have also risen in that time period, from an average of five percent to around 6.26 percent. Not only are cars more expensive, but your auto loan will now cost you more money.

While 2009 was a peak recession year, the fact of the matter is that new cars aren’t keeping pace with inflation and certainly haven’t matched median incomes. The Detroit News reports that this will ultimately push more customers into the secondhand market. However, those vehicles only represent a comparative bargain, as the average transaction price of a used vehicle rose by a hefty 36 percent between 2009 and 2018.

“Vehicle prices have been rising all year but really hit a crescendo in December. Even though holiday bonus checks likely played a role in boosting down payments to record levels, when buyers are willing to put down more than $4,000 for a new car, it says something,” explained Jessica Caldwell, executive director of industry analysis at Edmunds. “There are fewer buyers in the market right now, but those who are there are not only feeling confident, they’re willing to shell out the extra cash to get a larger vehicle with all the bells and whistles. They know what they want and they are willing to accept the higher costs.”

That’s great for them, but what will the plebeian masses eat drive when there isn’t enough money? Extra-crappy used cars or, perhaps, they’re supposed to just embrace mobility and take scooters or cabs everywhere? How is this going to be sustainable for an industry that’s predominantly comprised of businesses that need to sell a substantial amount of product every year to stay in the black?

It might not be. Road & Track speculates that the automotive industry could be heading toward a collapse reminiscent of the mortgage industry crisis that kicked off in 2007. If you’ll recall, that economic setback didn’t pan out particularly well for automakers, either, forcing the U.S. government to intervene. To their credit, carmakers seem to be more cautious this time around. Warning signs of a possible recession are being heeded. Unfortunately, major price reductions don’t appear to be a large part of any automaker’s plan.

While there may be a little room left before the walls come crashing down around our collective head, the Federal Reserve Bank reported that roughly seven million Americans were 90 days or more past due on their car loans at the end of last year. That’s one million more people than in 2017.

[Images: General Motors]

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  • Jimmyy Jimmyy on Apr 05, 2019

    For years, I have driven Honda and Toyota products. Recently, I was given a F150 V8 4X4 XLT for a rental. It was nearly brand new and I loved it. So, when I got back to California, I decided to buy one of those. Out the door, the price tag was well onto the 40s. Forget that. I am wealthy and not stupid. Ford is not lining their pockets with my money. Now, I am shopping for a new Toyota 4Runner. A dealer way out in the San Fernando valley is offering me a deal ... in the low 30s. If I can't find a similar deal in Orange County, I will be doing the drive soon. So, for you auto guys that think I should just whip out the money for a F150 because I have it ... are you that stupid? Ford, you lost your chance to get a customer.

    • See 4 previous
    • DenverMike DenverMike on Apr 06, 2019

      @jimmyy The 4Runner, Part-Time 4wd starts at $36.4K. The F-150 4wd Crew Cab XLT V8 starts at $45.7K MSRP and $10K off this specific pickup isn't a problem, even in California. If by "foreign vehicles" you mean Mercedes and BMW, I'd say yeah smart move switching from those turkeys, financially (resale value) and otherwise. And I really sorta like those cars actually, they're especially pleasing to the eyes, compared to Japanese luxury, but yeah. I really like Newport Beach, but I'd rather have the worst house in La Jolla. Now that you mention it, I'm gonna start looking.

  • Ponchoman49 Ponchoman49 on Apr 09, 2019

    I bought my 2017 Impala LT 2.5 with convenience package a year ago with only 13k miles for 18K. It still looked and smelled like new and drove flawlessly and I was the first registered owner. It now has 28K miles and is still perfect. I couldn't touch a new Impala LT at the time for under 28K. This is the way I have bought my last 3 cars. One year old low mileage models that dealers eventually run specials on. I do a search for the lowest priced cars and try and find the cleanest lowest mileage one that hasn't had body work and go from there. This practice has served me quite well and my last 3 Impala's have been great reliable cars. Buying new is a waste of money for me.

  • Art Vandelay Best? PCH from Ventura to somewhere near Lompoc. Most Famous? Route Irish
  • GT Ross The black wheel fad cannot die soon enough for me.
  • Brett Woods My 4-Runner had a manual with the 4-cylinder. It was acceptable but not really fun. I have thought before that auto with a six cylinder would have been smoother, more comfortable, and need less maintenance. Ditto my 4 banger manual Japanese pick-up. Nowhere near as nice as a GM with auto and six cylinders that I tried a bit later. Drove with a U.S. buddy who got one of the first C8s. He said he didn't even consider a manual. There was an article about how fewer than ten percent of buyers optioned a manual in the U.S. when they were available. Visited my English cousin who lived in a hilly suburb and she had a manual Range Rover and said she never even considered an automatic. That's culture for you.  Miata, Boxster, Mustang, Corvette and Camaro; I only want manual but I can see both sides of the argument for a Mustang, Camaro or Challenger. Once you get past a certain size and weight, cruising with automatic is a better dynamic. A dual clutch automatic is smoother, faster, probably more reliable, and still allows you to select and hold a gear. When you get these vehicles with a high performance envelope, dual-clutch automatic is what brings home the numbers. 
  • ToolGuy 2019 had better comments than 2023 😉
  • Inside Looking Out In June 1973, Leonid Brezhnev arrived in Washington for his second summit meeting with President Richard Nixon. Knowing of the Soviet leader’s fondness for luxury automobiles, Nixon gave him a shiny Lincoln Continental. Brezhnev was delighted with the present and insisted on taking a spin around Camp David, speeding through turns while the president nervously asked him to slow down.