It’s no secret that life is getting more expensive. Incomes are struggling to keep pace with rising prices, and the gap is widening. Few things illustrate this better than vehicle affordability, with more Americans finding themselves priced out of new cars altogether.
A recent study by the Center for Automotive Research puts a number on this growing divide. In 2024, the top 20% of highest-earning households accounted for 55% of all spending on new vehicles. That’s a new record and represents a significant jump from the 42% measured in 2019.
Higher Car Prices Are Only Part Of The Problem
Mitsubishi dealershipMitsubishi
The average transaction price of a new vehicle is now hovering around $50,000. That’s nearly double what buyers paid in the early 2000s, but according to the study, inflation-adjusted prices have increased by only about 8%. For more affordable vehicles, real prices have actually fallen 16%. Affordability has also improved since the pandemic-era peak. In the second quarter of 2026, buying a vehicle at the average transaction price required 34.4 weeks of median household income, down from 40.3 weeks in late 2022.
But the purchase price doesn’t paint the full picture when it comes to affordability. Insurance premiums have been rising faster than vehicle prices, driven in large part by the cost of repairing increasingly complex cars. Think all those cameras and sensors, not to mention headlights with hundreds of tiny parts. Throw in higher interest rates, and this year, steep fuel prices too, and the burden only gets more difficult.
All those extra costs hit buyers on tighter budgets hardest, making a new car harder to afford even when inflation-adjusted prices are down. And we haven’t even mentioned housing, medical, childcare costs all growing faster than car prices over the past two decades.
How Are Automakers Responding?
Automakers have adapted to the changing market by catering increasingly to buyers with higher incomes. It’s one reason that even full-size pickup trucks and mainstream three-row SUVs, once mainstays of the middle class, are now pushing past $70,000. To highlight this trend, in 2025, there were nearly twice as many vehicles on sale for more than $100,000 as there were for less than $30,000.
The shift has come at the expense of affordable models, with cars like the Chevrolet Sonic, Chevrolet Malibu, and Nissan Versa disappearing from the US market in recent years. Automakers are also facing higher production costs, and now also tariff pressures, making it harder to turn a profit on entry-level vehicles with already-thin margins.
2021 Chevrolet Malibu Silver and Red at DealershipChevrolet
And even when affordable models remain, buyers that typically went for those are largely disappearing or opting for more expensive vehicles with longer loans. According to the study, new vehicles priced below $25,000 accounted for less than 2% of sales in 2025. That’s a smaller percentage than vehicles priced over $95,000, the researchers said.
CarBuzz Insight – Why This Matters
Unless incomes rise substantially or costs for essentials like housing come down, this trend is unlikely to reverse anytime soon. You’ve probably heard of the K-shaped economy, where higher earners steam ahead while everyone else struggles to keep up. America’s car market is increasingly reflecting that divide.
In other words, what was once a realistic goal for middle-class households is increasingly becoming a luxury.
Sources: Center for Automotive Research
