Half of U.S. households can only afford a $400 car payment. Their options — new or used — are scarce. | MarketWatch
Despite some improvements this year, car affordability remains a pressing issue. Tesla’s CEO, Elon Musk, highlighted this concern, acknowledging that many people are living paycheck to paycheck and emphasizing the significance of even small differences in monthly payments. While rumors swirl about Tesla’s potential entry into the market with a $25,000 model, the reality is that such affordable options are scarce yet crucial for most Americans.
A recent report by the auto-insurance app Jerry labeled the situation a “car-ownership affordability crisis,” with new-car buyers shelling out over $47,000 on average. This hefty price tag far surpasses what the typical American household can comfortably afford. Cox Automotive’s Chief Economist noted that the average monthly payment for new vehicles exceeds what many households can manage, with only about half able to afford a $400 fee.
With interest rates for new cars dictating limited borrowing capabilities, the $20,000 and $25,000 new vehicle options are becoming increasingly rare. This scarcity is compounded by the fact that even at the $400 monthly payment threshold, many households are stretched thin financially. Major automakers’ shift away from small, affordable cars further exacerbates the problem, leaving consumers with fewer economic choices.
As a result, more consumers are turning to the used car market, where prices are comparatively lower. However, even in this realm, affordability remains a concern, with the average monthly payment for used cars hovering around $549. Despite these challenges, there’s hope that carmakers like Ford will be eyeing the demand for less expensive electric vehicles, aiming to deliver affordable options in the $25,000 to $30,000 range…………..
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How might the evolving landscape of car affordability impact consumer behavior and the strategies of car manufacturers in the coming years?
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