With the most recent news that the average price for a new vehicle topped $50,000 in the U.S. last month, according to Cox Automotive figures cited by CNBC’s Michael Wayland, a number of questions and concerns appear to be arising.
“The average price paid for a new vehicle last month topped $50,000 for the first time ever, Cox Automotive’s Kelley Blue Book reported Monday. Meanwhile, auto loan delinquency rates remain near all-time highs for those with low credit ratings,” Wayland wrote, pivoting to cite Cox Automotive executive analyst Erin Keating.
“While there are many affordable options out there, many price-conscious buyers are choosing to stay on the sidelines or cruising in the used-vehicle market. Today’s auto market is being driven by wealthier households who have access to capital, good loan rates and are propping up the higher end of the market,” Keating said.
And as Yahoo! Finance reporter Pras Subramanian detailed, this may come as little surprise to those who follow the automotive sector stateside. Also quoting Keating, Subramanian noted that the most popular vehicle purchased new in the United States was a Ford pickup costing more than $65,000, bucking the popular wisdom that rising car prices were stopping buyers in their tracks.
Keating went on to note that while wealthier Americans were faring relatively well, leveraging low rates and growing capital to splash out on expensive vehicles, the $20,000 market for cars was “nearly extinct” — lower-income Americans either opting for used cars or trucks or sitting on the sidelines entirely.
With pricy EVs and higher-end rides dominating the new vehicle sales market — EV sales trended upward to reach a 10.5% market share in Q3, largely thanks to Tesla, per Electrek — there could be more to the story than the headline itself represents.
The K-Shaped Economy, Rising Delinquency Rates, and $1.66 Trillion in US Auto Debt Backdrop New Car Price Breakthrough
A confluence of factors are emerging contributing to a muddled portrait of the auto segment, as well as the broader U.S. economy.
- The K-shaped economy: Essentially speaking to a massive diverging in the reality of lower-income American consumers with the wealthier counterparts, the K-shaped economy was the topic of conversation on CNBC’s “Squawk on the Street.” Apollo Global Management chief economist Torsten Slok noted that significant affordability concerns (both in terms of vehicles and in terms of the broader economy), in addition to an uptick in auto loan delinquencies, were becoming more prominent.
- The U.S. reaches $1.66 trillion in total auto debt: According to the Consumer Federation of America, auto finance has reached “a breaking point.” And as KBB underscored, the situation wasn’t about to get any better, with tariff pressures and a healthy market for upper-income Americans providing purchasing power to press ahead. However, New York Fed data from 2024 also indicated that subprime borrowers weren’t the only ones struggling: Car buyers with above average FICO scores (620-679) remained twice as likely to fall behind on regular payments as compared to pre-pandemic levels.
Overall, though, Keating noted that new car pricing was always inflationary in nature — and that top price barriers are always, eventually, subject to breaking, though not without one final caveat.
“We’ve been expecting to break through the $50,000 barrier,” Keating said. “That’s today’s market, and it is ripe for disruption.”