Over a decade ago now, when gas prices were at all-time highs, small cars were all the rage, because they were stingy on gas and inexpensive. I remember a colleague back then buying a Hummer and other colleagues saying how against the prevailing winds that purchase was. Shortly thereafter, Hummer died. Of course, nowadays, Hummer is back and people can’t get enough of big cars, even with gas prices approaching all-time highs.
There have been some theories as to why that is, with the most convincing being that cars are more efficient these days than they were in 2008 and 2009, and, thus, running an SUV is not so expensive a proposition as it was then. This is not exactly true — but I don’t really know how else to explain the broad and persistent demand for expensive trucks and SUVs. Perhaps it is also the case that the new car market is another case of the rich getting richer and the poor getting poorer, in that, before both the rich and the poor were in the mix, and now it is just the rich.
There is also the chip shortage, which has incentivized automakers to prioritize making their most profitable vehicles, which are their most expensive, with new car prices now averaging over $45,000.
That is all a long way of saying that those of us in the market for a car under $20,000 have fewer options that we did a decade ago, as in America, the Honda Fit is dead, the Chevy Sonic is dead, the Toyota Yaris is dead, and so is the Ford Fiesta. A little over a year ago, we catalogued the 17 cars that you can buy in America for less than $20,000; that list might be even shorter now. Also, don’t tell me that the Ford Maverick is under $20,000, as its starting price of $19,995 doesn’t include destination fees and I doubt many people will buy a base Maverick with zero options, anyway, though I’d be happy to be wrong about that.
Anyway, Automotive News further surveyed the landscape:
For dealers who have traditionally welcomed buyers at the lower end of the market, the semiconductor shortage has made it difficult to stock vehicles that once sold below their sticker price with incentives.
“It has been an issue for first-time buyers, students or anyone looking to get a reliable car that is inexpensive,” said Ayman Moussa, CEO of Carnamic auto group in Northern California with Mitsubishi, Nissan, Hyundai and Kia stores.
“We are selling [Mitsubishi] Mirages at MSRP, and used Mirages that we used to sell under $10,000 aren’t available now,” said Moussa. Same with his other brands. “They aren’t available to start, but when they arrive, they are gone in 10 days.”
Most suspect here are the quotes from the automakers themselves. For example: Mark Reuss, GM’s president, who laments that he wishes that GM would sell more inexpensive cars but it simply can’t, for reasons that are opaque.
“I don’t think they’re gone,” he said at an event last week. “We used to offer cars in that segment, lots of cars in that segment, and that segment dried up. And it wasn’t because we didn’t offer things like that, but it just wasn’t there anymore. I’ve got to be careful with what we do there, but I would love to have cars in that price range.”
Auto News also says that, since EVs are so expensive, it’s probably wise not to get one’s hopes up for more new cars under $20,000 in the foreseeable future, even including government subsidies. Also, let me add another likely reason why the average price of a new car is going up, which is that a lot of people are convincing themselves that they can afford a more expensive car than they actually can, enabled by 84-month auto loans and such. I see no way in which that will end poorly. Get yourself a new Mitsubishi Mirage, I say, while you still can.