Why Don’t We Have Cheap Cars Anymore?

Increasing Car Prices

In the last few weeks, I’ve had a lot of conversations with people about their car buying goals. And the number one emotion I’m hearing? Sticker shock. People who haven’t bought a car since before the pandemic are asking, "Wait, when did cars get so expensive?"

I had to break the bad news to one client who hoped to replace their 15-year-old minivan for $22,000. Sadly, that budget won’t even get you a used model with under 100,000 miles and the features they wanted. Car prices have gotten out of control.

How Expensive Are Cars Now?

The average new car price in the U.S. is now flirting with $50,000. And that figure doesn’t even include luxury exotics like Ferraris or Lamborghinis. We’re talking everyday vehicles—SUVs, trucks, sedans. Some mainstream models, like the GMC Yukon or Jeep Wagoneer, now start over $100,000 when fully loaded. That used to be the cost of a house!

With higher sticker prices and rising interest rates, monthly payments are also hitting record highs. It’s no wonder many car buyers are underwater on their loans.

So, Why Aren’t There Any Cheap Cars?

To understand why we no longer have truly affordable cars, we need to look at what caused this pricing crisis in the first place.

• Inflation: Overall inflation since 2019 is around 23%, but new car prices have surged over 30% in the same time.

• Tech Overload: Today’s cars are packed with advanced technology—touchscreens, sensors, cameras, safety systems—which all add to production costs.

But it’s more than just inflation and gadgets.

What Is an Affordable Car, Really?

The U.S. Bureau of Labor Statistics reports that the average U.S. income is about $62,000 a year. Consumers spend roughly 15% of their income on transportation. That means the average car buyer can afford a vehicle priced around $25,000. But good luck finding one.

As of now, the cheapest new cars on the market are the Mitsubishi Mirage and the Nissan Versa. And both are being discontinued after 2025. Sub-$20,000 cars are going extinct.

Automakers Are Chasing Profits, Not Volume

A big driver of rising prices is a strategic shift by U.S. automakers. They’ve openly admitted that they’re prioritizing profit margins over market share. That means fewer budget-friendly models and more expensive SUVs and trucks that yield higher profits.

Americans love SUVs, and automakers are responding. In 2009, SUVs made up 30% of car sales. By 2019, it was 50%. Today, nearly 60% of all vehicles sold are SUVs.

During the pandemic, when vehicle supply was tight, automakers leaned into higher trims and bigger vehicles to maximize profits on every unit sold. It worked—they posted record profits in 2023. Now, even with supply recovering, they aren’t in a hurry to go back to selling lower-margin economy cars.

What Does It Cost to Build a Cheap Car?

Building an affordable car is tough. Here’s the rough breakdown:

• 70% of the MSRP goes to production costs

• 20-25% goes to overhead and marketing

• 5-10% is actual profit

Lowering the price means trimming those already slim margins. And automakers simply don’t see enough return on investment from building basic cars.

Electric vehicles could help change that. EV platforms (often called "skateboard" platforms) are cheaper and simpler to build. Battery costs are falling, and shared platforms mean automakers can scale production more efficiently.

Tesla even developed a new assembly process called the "unboxed process" to reduce costs. While they shelved the $25,000 EV in favor of their robo-taxi project, the manufacturing approach could inspire change across the industry.

Chinese Automakers Are a Serious Threat

Chinese brands like BYD and Nio are producing EVs faster and cheaper than their U.S. counterparts. Why? Because they can:

• Labor costs in China are as low as $2 to $4 an hour.

• Their R&D timelines are shorter.

• They face fewer environmental regulations and workplace safety standards.

• They rely heavily on virtual safety testing instead of expensive crash tests.

Some even use forced labor (yes, that’s still a thing), which helps them keep production costs low. Add in minimal legal liability and minimal worker protections, and you can see how they get to market so fast and so cheap.

Tariffs currently keep Chinese cars out of the U.S., but those barriers may not hold forever. The competitive pressure is real, and U.S. automakers know it.

Could We Make Affordable Cars Again?

Yes, but it would require:

• Streamlined manufacturing processes

• Smarter R&D strategies

• Stable government policies and EV incentives

• Ethical labor practices that don’t drive costs through the roof

Collaboration is one way forward. Japanese brands are already sharing platforms and tech to lower development costs. Honda and GM, Subaru and Toyota—they’re teaming up where it counts.

The U.S. will need to adopt some of these strategies (without sacrificing ethics or safety) if we want to bring affordable cars back to the average American.

Final Thoughts

Cars are expensive because the system is built that way—for now. With pressure from China, smarter technology, and smarter manufacturing methods, the U.S. has the tools to make more affordable vehicles again.

But it’s going to take more than wishful thinking. It’ll take serious change across the industry, smarter policy decisions, and a renewed focus on creating value for consumers, not just investors.

Need a more affordable ride in the meantime? Your best bet is to buy used. And lucky for you, I cover how to do exactly that in The No BS Guide to Buying a Car online course.

🎧 Want to dig deeper into why cheap cars disappeared? Listen to this episode of The Straight Shift podcast for the full story.