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Priced Out: Can the Average American Afford a New Car? | Trending Topics

There are few joys that can compare to the experience of buying and driving a new car. After all, there is a reason that the term “new car smell” can evoke such a strong feeling. 2015 was a particularly robust year for new car sales: 17.5 million new cars were sold, the best sales year in quite some time. The numbers are high, but with prices of new cars soaring to record heights, is the average American able to experience that new car smell?

In 2009, prospects for the automotive industry looked grim. In that year, a downturn in the economy coupled with high unemployment led to dismal sales figures – a meager 10.4 million new vehicles were sold in 2009. As the economy improved and gas prices came back down to earth, Americans again began buying new cars. But, when you take a closer look at the numbers, the sales figures seem to be a boon for automakers and a bust for the average American.

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While the sales figures for new car sales in 2015 may jump off the page, further investigation shows that the number may not be as impressive as it portends to be. Ward’s Auto, when analyzing historical data, offers this analysis: “The best years were 1978 and 1986, when 6.9% and 6.8% of the population bought a new vehicle, respectively. The worst years were 1961 and 2009, when only 3.7% and 3.4% bought new vehicles. If sales in the American market hit 17.5 million new vehicles this year, that would represent only 5.3% of the population. Imagine for a moment that the market hit the same percentage rate that it did in 1978. If 6.9% of the population would buy a new car this year, sales would hit 22 million!” While new car sales have improved steadily since 2009, in comparison with previous years, they are not nearly as strong as they appear.

Many American drivers would like a new car, but are finding it increasingly difficult to afford one. According to Kelly Blue Book, the average price of a new vehicle in the United States reached a record $34,428 in December 2015. To put that number into perspective, the average American family’s income runs just north of $53,000 a year. Motley Fool reports that “The analysts at Interest.com took a look at the median household income in the 25 largest U.S. metropolitan areas. They then applied a common rule of thumb for determining how much someone can comfortably afford to spend on a car. Their conclusion? Only in Washington, D.C., can median-income households afford to buy a new car.”

While new car sales are on the rise, many Americans are left driving an unreliable, inefficient, and unwanted vehicle. Unfortunately, with used car prices also at all-time highs, there are few alternatives and Americans are holding on to their clunkers longer and longer. For the average American to be able to experience that new car smell again, affordable alternatives need to be introduced to the market. Taken as a whole, the American new car market is ripe for affordable innovation.

 

 

 

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