By Mia Bevacqua
In most parts of America, having a car is a necessity rather than a luxury. The problem is, both new and used car prices are climbing, making vehicles hard to obtain for many Americans. Even 10-year old cars have a median resale price of $8,657 – up 75% from 2010 – according to a recent report by Reuters. And that means basic transportation is getting harder and harder to come by for low-income households.
New and Late-Model Used Car Prices Soar
Late-model vehicles (both new and used) are unaffordable for many U.S. consumers. More than 7 million Americans are already at least 90 days behind on their car payment, according to the New York Federal Reserve.
Since 2010, new vehicle prices have increased by 25%. The average price of a new car was $36,843 in April of 2019, making a shiny new ride hard to afford for many consumers
It’s not just new vehicles that are getting car buyers in over their heads, either. According to USA Today, in 2018, the average cost of a used car was a staggering $19,657. That’s a tough nut to crack for many families, considering the median U.S. household income was $61,937 in 2018. That means, on average, the price of a used car is nearly a third of a family’s yearly income.
“This is pinching people at the worst point possible,” said Ivan Drury, Edmunds’ senior manager of industry analysis. “If you need basic A to B transportation, you have to get an older car that needs more repairs and has more wear-and-tear issues.”
Older Used Cars Hold Their Value, Making Them harder to Obtain
Low-income households cannot afford new or late-model used cars. As such, they often gravitate toward vehicles that are 10-plus years old. But cars of that vintage aren’t as cheap – or as plentiful – as they once were.
George Augustaitis, director of automotive industry analytics at CarGurus Inc, says his team has noticed an accelerated decline in vehicles priced under $10,000. Also, the company’s data shows a corresponding drop in the availability of cars between 8 and 12 years old.
The great recession of 2008 is part of the reason older cars now hold their value. Because automakers reduced vehicle production during that time, there are fewer decade-old used cars to choose from.
As a result, many working-class poor are getting stuck with a worn-out vehicle. Others are getting pushed out of the used car market altogether.