No, it’s not just you – high prices are pushing massive numbers of would-be new car shoppers into either keeping their old cars a little while longer or shopping for something pre-owned instead. According to reporting from the Wall Street Journal, rising fuel costs and unfavorable interest rates have removed about 1 million shoppers from the new car market since the beginning of the decade, and unless things change significantly, they’re not likely to return to their beloved, brand-new RAV4s and Altimas.
No Relief From Financial Pressures
Dealer files lawsuit against Mitsubishi, alleging that the automaker failed to deliver on several promises. Mitsubishi
New vehicle sales took a big nosedive during the height of the COVID-19 pandemic, when auto manufacturers and suppliers idled their factories to protect workers from the virus. But even after reopening, the slow-to-react supply chain couldn’t keep up with pent-up consumer demand, and most officially franchised dealers resorted to selling used cars instead. Market analysts were expecting the new car market to expand by now since the supply shortage has mostly been rectified – though tariffs threaten to undo that progress – but mounting economic issues are still leading customers away from new cars.
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According to the WSJ, continuing inflation and high gas prices are keeping customers home or forcing them to opt for cheaper, pre-owned vehicles instead of new models. Adding to the financial stress, many automakers have discontinued their cheapest models, such as the Nissan Versa, Honda Fit, and Kia Soul, forcing new-car shoppers into more expensive and higher-profit cars and SUVs. As a result, the average transaction price of a new car was more than $50,000 in 2025, an all-time high.
The Journal reports that although some automakers are concerned about their declining sales, others – including Ford and General Motors – make more profit selling a smaller amount of more expensive vehicles than they would on cheaper cars that make less money per unit. That could be leading to some feet-dragging on the part of auto manufacturers when it comes to reintroducing inexpensive cars to the lineup.
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A Tough Situation For New Shoppers, Too
Those who are braving the new car market find themselves facing yet another hurdle. Due to the average cost of a new vehicle, many shoppers are choosing longer loan terms, with Experian reporting that nearly a third of all auto loans are 72 months or more. Combined with rising interest rates – blame inflation yet again – American shoppers are spending far more on loans than they have in recent years – .
Subprime loans are also on the rise, making up 15.75 percent of new-vehicle financing compared to 14.4 percent last year. Those numbers should be concerning to anyone who experienced the 2008 financial crisis, when a massive number of home and auto loans went upside down, sending some customers into default.
What Options Does A Car Shopper Have?
car dealer with customersPhoto by Antoni Shkraba / Pexels
People who need a new (or new-to-them) car do have some decent options in front of them. A certified pre-owned vehicle, bought from a franchise dealer, usually comes with a warranty, making gently used vehicles as appealing as their brand-new counterparts. Although used car loans typically involve higher interest rates, some certified pre-owned programs include special financing that’s equal to new cars. Furthermore, although many low-priced cars have gone the way of the dodo, there are still several standout options that come in well beneath that $50k average transaction price.
Among them are arguably the best crop of compact cars in history, including the Hyundai Elantra and Kia K4, both of which can be had for between $25,000 and $30,000 very well-equipped. The Honda Civic hybrid is a bit pricier, but its spacious interior and phenomenal fuel economy still make it an appealing option. Those who need (or want) the flexibility of three-row seating should consider the $31,790 Mitsubishi Outlander or $33,885 Kia Sorento, which also offer more expensive, more powerful, and more efficient hybrid models for those with a bit more money to spend.
CarBuzz Take – What Does This Mean?
Despite declining sales, automakers may not have much incentive to sell more cars for under $30,000. Ford, for example, makes about 90 percent of its global profit on F-Series sales alone. Despite that, the automaker is still developing its “Model T moment,” a universal electric platform that’s reported to spawn a $30,000 pickup. Until that happens, though, we’d caution new car shoppers to be very vigilant and realistic about what they can afford, both in terms of list price and financing.
Sources: Wall Street Journal, Experian
