Here’s a number that should stop you in your tracks: the average new car in America now costs more than $50,000. Not a luxury car. Not a loaded truck. The average. If that feels like it happened overnight, you’re not wrong. In 2019, the average transaction price was $37,310. Six years later, it’s crossed a threshold that would have seemed absurd a decade ago. And the consequences are reshaping who gets to buy a new car in this country.
Let me put it another way. If you make the median U.S. household income of about $83,700 a year, you’d need roughly seven months of gross income just to cover the sticker price of a new vehicle. Before taxes. Before insurance. Before you’ve eaten a single meal or paid rent. That’s not a car purchase. That’s a second mortgage.
One Third of Americans Are Completely Locked Out
A study from consulting firm Plante Moran found that a full third of Americans simply cannot afford any new car at all. Zero models fit their budget. For households earning $65,000 or less, only about 110 vehicle models are classified as “affordable.” And that’s out of hundreds on the market. Even if you bump up to a household income of $105,000, you’re still looking at only about 250 models. The rest? Out of reach.
This isn’t just an inconvenience. It’s a structural shift in who gets to participate in the new car market. In 2020, half of all new car buyers earned less than $100,000 a year. By 2026, that number dropped to just 37%. Meanwhile, the share of buyers earning over $200,000 jumped from 18% to 29% in the same window. Mark Barrott of Plante Moran put it bluntly: “We’re now relying on the extremely wealthy to generate the sales. That’s a structural problem.”
There Are Zero New Cars Under $20,000 Now
This is the one that really got me. In 2024, there were three new cars priced under $20,000. Three. And now? There are none. The Nissan Versa, which had been one of the last holdouts for budget buyers for nearly two decades, was discontinued after the 2025 model year. The cheapest new car you can buy today is the 2026 Hyundai Venue, starting at $20,550.
Think about what that means. If you’re a young person trying to buy your first car, or a single parent who needs reliable transportation to get to work, the new car market has essentially told you: “This isn’t for you anymore.” By July 2024, there were nearly zero new vehicle transactions under $20,000. The entry-level buyer has been erased from the conversation.
Monthly Payments Are Hitting $1,000 and Nobody’s Blinking
Here’s where things get really uncomfortable. In Q4 2025, a record 20.3% of new car buyers committed to monthly payments of $1,000 or more. One in five. The average monthly payment for a financed new vehicle hit $772, also a record. And buyers borrowed an average of $43,759 to make the purchase happen.
To put those monthly numbers in perspective: a $500 monthly payment before the pandemic was enough to get you into a Toyota Highlander. Today, that same $500 gets you a compact car like a Toyota Corolla. Same payment, dramatically less car. And it’s not like interest rates are helping. The average rate on a new car loan sat at 6.7% in Q4 2025. That’s near historic highs for the modern era.
S&P Global projects that by the end of 2026, as many as 40% of buyers could be making $1,000 or more per month on their car. Let that sink in.
Seven Year Loans Are Becoming Normal
Because people can’t actually afford these cars at normal loan terms, they’re stretching their payments to absurd lengths. In Q4 2025, 20.8% of all financed new vehicle purchases used 84-month or longer loan terms. That’s seven years. Up from 17.9% just a year earlier. By November 2025, 84-month loans hit a record 22% share of new vehicle financing.
The average new car loan term is now 68.9 months, which is just under six years. For a depreciating asset. People are making payments on cars that will be worth a fraction of the loan balance by the time they’re paid off. Americans collectively owe $1.667 trillion in auto loan debt. That’s 8.9% of all consumer debt in the country, second only to mortgages. These are housing crisis numbers applied to something that loses value the second you drive it off the lot.
Automakers Killed the Cheap Car on Purpose
This isn’t just about inflation or bad luck. Automakers made deliberate choices to abandon affordable vehicles. They’ve been eliminating entry-level trims and focusing on higher, more profitable packages. Entry-level trims now make up only 33% of all new vehicle inventory. Toyota updated its Highlander SUV for 2026 and dropped the base LE trim entirely, making the XLE the new starting point and raising the entry price by nearly $5,000.
Ford, GM, and Stellantis have increasingly focused on higher-priced trucks and SUVs because that’s where the fat margins are. Small sedans and compact cars? They’ve been steadily trimmed from the lineup. Light trucks and SUVs accounted for 82.3% of new vehicle sales through July 2025. The car companies decided small, affordable vehicles weren’t profitable enough, so they simply stopped making most of them. Ford CEO Jim Farley himself admitted that relying too heavily on big, high-margin vehicles could backfire for the entire industry.
Destination Fees Are a Quiet Rip-Off
Even if you find a car with a reasonable sticker price, the fees tacked on are getting out of control. Destination charges (the fee to deliver the car from the factory to the dealer) rose 263% in 2025. Since 2022, destination fees for domestic brands have gone up $581 and now average more than $2,000. Full-size GM and Ford trucks and SUVs are hitting destination fees of $2,795 for 2026 models. That’s almost $3,000 just to get the car to the dealership. It’s a line item that most people don’t negotiate, and automakers know it.
Tariffs Made Everything Worse
The 25% tariff on all imported automobiles and auto parts, effective April 2025, dumped an estimated $30 billion in costs onto the auto industry. Imported vehicles saw price hikes ranging from $5,000 to $8,900 per vehicle. Even domestic vehicles went up $1,600 to $2,000 because of higher material costs for steel and aluminum.
Toyota got hit the hardest, projecting $9.1 billion in tariff-related costs for the fiscal year ending March 2026. Detroit’s Big Three collectively absorbed $6.5 billion. Ford raised prices on its Mexico-built Bronco Sport, Maverick, and Mustang Mach-E by up to $2,000. Subaru raised interest rates by up to 3% on some vehicles, making cars like the Outback up to $4,000 more expensive. Here’s the really painful part: the tariff costs almost certainly killed off the last remaining cheap cars, which had razor-thin margins to begin with. Those bottom-shelf models couldn’t absorb the extra costs, so they just disappeared.
Younger Millennials Are Getting Crushed
Bank of America flagged something that deserves more attention. Younger millennials, those between 30 and 36, have seen their monthly car payments rise nearly 60% since 2019. That’s a generation that already got hammered by student loans and a housing market that priced them out of homeownership in many cities. Now their car payments are eating into whatever financial stability they’ve managed to build.
Retail consumers spent $620 billion on new vehicles in 2025, a nearly 6% increase from the prior year. But a chunk of that was driven by tariff-related panic buying, not organic demand. After strong first-half numbers, sales weakened in Q3 and continued to decline in Q4.
People Are Fighting Back the Only Way They Can
Not everyone is just accepting this. Some buyers are gravitating toward the handful of value-focused models still available. The Ford Maverick, one of the cheapest pickups on the market, saw sales jump from about 94,000 units in 2023 to more than 155,000 in 2025. Sales of its stripped-down XL trim rose 105% in Q4 2025 alone. The Chevrolet Trax saw sales rise 89% between 2023 and 2025. People want affordable cars. They’re just running out of places to find them.
Meanwhile, a Jeff Bezos-backed startup called Slate Motors is working on a stripped-down electric pickup expected to be priced in the mid-$20,000s. No giant touchscreen. No power-operated everything. Just a simple truck. It’s already drawn more than 160,000 reservations. That demand tells you everything about where the market has gone wrong.
Others are skipping new cars entirely, buying used, or just holding onto what they’ve got. But even the used market isn’t immune. A record 6.3% of used vehicle buyers committed to $1,000 or more in monthly payments in Q4 2025. When a used car costs what a new car used to, the whole system is broken. And right now, it is very, very broken.
