New CAR Research Finds Vehicle Affordability Challenge Extends Beyond the Sticker Price Study finds vehicle prices have risen modestly after adjusting for inflation, while shifting buyer demographics, shifting vehicle mix, financing costs, insurance, and broader household expenses are reshaping access to new vehicles

ANN ARBOR, MI – As vehicle affordability becomes an increasingly important issue for consumers, automakers, and policymakers, new research from the Center for Automotive Research (CAR) finds that the challenge cannot be explained by vehicle prices alone.

CAR’s new report, Vehicle Affordability: Defining, Diagnosing, and Understanding New Vehicle Affordability in the United States, examines more than two decades of vehicle pricing, household income, financing, product content, production costs, and total ownership expenses. The analysis finds that while new vehicle prices have risen substantially in nominal terms, the underlying affordability picture is considerably more complex.

“Vehicle affordability is one of the most consequential issues facing the automotive industry because it ultimately determines who can participate in the new vehicle market,” said Elizabeth Krear, President & CEO of the Center for Automotive Research. “Understanding affordability requires looking at the vehicle, the consumer, the cost of ownership and the competing pressures on household budgets together.”

Among the report’s key findings:

• New vehicle prices have risen sharply in nominal terms, but far more modestly in real terms. Average consumer expenditure per new vehicle has nearly doubled since 2002, but real expenditure (adjusted for inflation) is up only about 8%. Real expenditure on passenger cars specifically is down 16%, meaning passenger cars have become relatively more affordable in terms of consumer purchasing power.
• The new vehicle market has bifurcated along income lines. The highest-earning 20% of households accounted for 55% of total new vehicle expenditure in 2024, up from 42% in 2019 and the largest share on record. The vehicle market has shifted accordingly, catering to these wealthier consumers. However, affordable models are still available.
• A meaningful share of the price increase reflects real gains, not just added cost. Today’s vehicles are safer, more powerful, more fuel-efficient, and equipped with technology – from advanced driver assistance systems to full connectivity – that did not exist two decades ago.
• Ownership costs, particularly insurance, are rising faster than vehicle prices themselves. Vehicle insurance expenditures are consuming a growing share of household budgets, disproportionately affecting lower- and middle-income and younger consumers, driven in part by the higher cost of repairing technologically advanced vehicles.
• Vehicles are relatively affordable compared with other major household costs. Vehicle-related price growth has trailed housing, medical care, education, and childcare since 2002, yet transportation’s shrinking share of total household spending suggests these faster-growing costs are crowding out consumers’ ability to buy a new vehicle.

The research also highlights an important distinction between the availability of lower-priced vehicles and their share of the marketplace. In 2025, nine models had average transaction prices below $25,000, yet those vehicles represented less than 2% of U.S. new vehicle sales. At the same time, the market continued to shift toward higher-priced vehicles, even after adjusting for inflation.

CAR’s analysis further finds that affordability began to deteriorate notably following 2019 before improving more recently. Under CAR’s financing assumptions, purchasing a vehicle at the average transaction price required an estimated 40.3 weeks of median household income in late 2022, compared with 34.4 weeks in the second quarter of 2026.

Production economics also contribute to the equation. Material and component prices increased sharply following the pandemic, while automotive manufacturing wages grew significantly. At the same time, industry profit margins have narrowed from their pandemic-era highs, underscoring the multiple and sometimes competing forces influencing vehicle pricing.

The report concludes that policies or business strategies focused on only one variable, such as MSRP, financing rates or insurance costs, are unlikely to resolve the affordability challenge on their own.

“Affordability should not be viewed simply as the price printed on the window sticker,” Krear added. “The more useful question is what consumers receive for that price, what it costs them to own the vehicle, and what other demands are competing for the same household income. 880 Technology Drive, Suite C, Ann Arbor, MI 48108 | www.cargroup.org

That broader perspective is essential for industry leaders and policymakers working to improve access to new vehicles.”

The full report, Vehicle Affordability: Defining, Diagnosing, and Understanding New Vehicle Affordability in the United States, is available at https://www.cargroup.org/publication/vehicle-affordability/.

Center for Automotive Research

The Center for Automotive Research (CAR) is an independent, non-profit organization conducting industry-driven research and analysis. Focusing on critical areas like Energy & Sustainability, Technology, and Labor, Economics, and Policy. CAR has been a trusted resource for the automotive industry for over twenty years. www.cargroup.org