Never Stop Driving #117: Where Are the Cheap Cars?
The average price of a new car is $48,644, or about two-thirds of the U.S. median income. There are more than 300 million people in this country and about 16 million new cars are sold every year, yet most Americans can’t afford a new car. Consequently, prices of used cars are similarly high: the average used car costs $25,000 and has 70,000 miles. It’s no wonder that the average car on our roads is now a staggering 13 years old.
My youngest turned 16 this week, which meant he could get a driver’s license. Since my wife and I are ready to be out of the chauffeur business—he’s the last of three kids to become a licensed driver—I’ve been shopping for cars. I wanted a manual transmission and my wife wanted newish and safe, which meant the pickings were slim. A local dealer had a 2017 VW Golf for sale with 65,000 miles. They wanted $16k for a car that probably cost $20K new and would soon need plenty of maintenance items like brakes, tires, and who knows what else.
While I dithered for a day, the car was sold, which the dealer warned me would happen. Here’s where many of you would suggest I get a much older and well-worn used car for under 10 grand and then teach my kid how to fix it. I went that route with my firstborn. We spent a lot of time making repairs, but it still broke down at the worst times, like when he needed to get to a school function, or I was out of town. The car added stress to our family routines rather than relieving it. My kids get plenty of wrenching time without daily driving a clunker. You might conclude that I simply chose the wrong used car, but here in the Rust Belt, every used car is a roll of the dice.
This time around, I figured the safer, smarter bet was to spend a little extra and buy new. With used cars so expensive, even Consumer Reports suggests this route. There are, however, only about a dozen new cars with sticker prices below 25 grand. Among them there is no Honda or Ford and only one Toyota. Interestingly, there’s a Chevy and a Buick on the list. Add in the stick shift requirement and the potential number drops to two, the Nissan Versa and the Volkswagen Jetta. I’d only consider the Jetta.
But there were no local Jettas with manual transmissions. My Ann Arbor dealer said, “Good luck.” That’s why last week I flew to Oshkosh, Wisconsin, to buy a Jetta at Bergstrom VW and drive it home. The total cost, without taxes, was just 20 grand for a car with A/C, power windows, CarPlay, and even cruise control. I think I got a screaming deal, and the process could not have been easier.
Auto industry executives have told me for years that it’s extremely difficult to make money selling cheap cars in the U.S. Americans equate size with price and when gas is inexpensive, they want big cars, which they’re willing to pay for. There’s also the weird reality that pickups and SUVS have gotten so big, that one feels foolishly vulnerable in, say, a Mini Cooper. Consequently, the new fleets are biased toward big, high-margin vehicles, which is why the average price is nearly 50 grand.
Recently, Automotive News ran an editorial talking about the shortage of cheap new cars. The car dealers the publication spoke to all said that “Demand for remaining entry-level vehicles is relentless and far outstrips supply.” The lack of entry-level cars presents a risk: “By ignoring the lower end of the market for so long, incumbent automakers are also indirectly creating societal and political pressures that could one day force open the door to inexpensive Chinese vehicles.”
The editorial acknowledged the billions spent by car companies chasing automated vehicles and electric powertrains. Innovate or die, as they say. Those efforts, AN added, “will be wasted if the lack of entry-level vehicles and frustrated consumers open the door to a flood of new, inexpensive Chinese competitors.” As I’ve noted repeatedly in this newsletter, adapting to present demands while preparing for the future is never easy for the global auto industry.
Before I sign off, let’s talk about the biggest racing news of the year: Basketball star Michael Jordan is suing NASCAR. Jordan and driver Denny Hamlin co-own the 23XI racing team, which, along with Front Row Motorsports, were the only two teams that didn’t sign the new NASCAR charter agreement. The suit claims that the France family and NASCAR are “monopolistic bullies.” The charter agreement, which is something like a temporary franchise agreement for the teams, has been bitterly negotiated over the past two years. The teams say they lose money and want a greater percentage of TV revenue. NASCAR says it’s their party so stuff it. Team owner Rick Hendrick said “I was just tired,” when asked why he signed the new deal. Hendrick is a car dealer, so he likely knows a few things about negotiating.
Without Jordan, who’s worth an estimated $3.5 billion, there is no lawsuit. I have no idea where this is going, but I hope that all the juicy drama—this is a racing soap opera—somehow makes it out. Hamlin is still running for this year’s NASCAR championship. This weekend the series is racing at Talladega, and I can only imagine the awkward scenes that could play out in the paddock.
When I’m not glued to the TV watching the Talladega race this weekend, I plan to get out and enjoy the cool fall weather driving. I hope you can do the same!
Larry
P.S.: Your feedback and comments are welcome.
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I live in Los Angeles and wanted a stick shift Jetta back in 2000 and have to go to Portland Oregon to find one, and then drive it back. This year, 2024, I sold the Jetta and over 80% of the people that came to look at the care could not drive a stick shift… BMW states a while back that over 80%of there customers cannot drive a stick shift… Stick Shifts are fading as fast as CD players..!
I guess I must live where all the poor people who drive stick shift live. I used a certain “tempestuous” search engine with manual gearbox / less than 75K miles on the clock / within 50 miles of my home as the criteria. Plenty of options, some better than others of course, but plenty nonetheless.
I’ve been wondering where all the reasonably priced cars are. I used to buy a lot of for-sale-by-owner cars for family, fun, and projects. Not any more! Covid messed up the supply/demand in the used car market, and apparently people got used to oversized prices for their used cars. I have always use three pricing services (KBB, Edmunds, and Black Book) to make an offer. Those services are supposed to represent the market price people are actually paying for cars. I take the average of the three prices and offer that to the seller. Until this past year, sellers seemed to think that was fair and they sold me thier cars. Lately, however, the owners of every car I have made an offer on (I’m looking for 4-5 year old Audi Q7s, Lexus GX460s, Volvo XC-90s, and the like) have required about $2000-$3000 more than the pricing services say other people are buying the same cars for. Bottom line, if the pricing services represent what prices are actually being paid for cars, why do those prices suddenly not reflect the inflated prices I’m running in to?
Sorry, Larry but I still think the safer, smarter route is a good used car. Cars today last a lot longer and are much more reliable than a generation ago. A car with 100,000 miles still has 50,000 to 100,000 miles of life left in it. And so what if you have to replace tires and brakes? You have to do that on any car you plan on keeping for a long time.
Larry, well bought. The VW dealer near us is awful ( ask me how I know), so those are off the table for us. We are lucky that we have a number of fun cars for fun days, but me, my spouse and two college age kids drive used 2010-2014 Lexus RX350. They are high quality safe cars. They run forever- my 2010 has 223,000 miles and 180,000 I put on it. They have never had an issue. Fluids, brakes, tires, batteries, nothing more. The paint looks excellent. The interiors look new. We take reasonable care of them, wax twice a year. Quality definitely lasts.
I’m a Ford guy. Born and raised in Detroit. I’ve been driving American cars (new and used). Used cars were all I bought for my kids to drive (all sticks!). Sure, I worked on them to keep them safely on the road, but they were “commuter cars”. Not “new” cars with all the “bells and whistles”. Life has moved on. The price of cars has steadily moved up the same as everything else. The problems that crop up on used cars are not as simple to fix as they were years ago, they are controlled by a computer. Trying to find a simple “driver” that can be worked on, you will have to go back at least 30 years or more. Suck it up, buy what you have to (new or used) and quit complaining. Keep driving!
I agree.
Houses and other things are just the same.
Also where you live affects price too.
Hi Larry,
You can add me to the list of ‘foolishly vulnerable’ as I drive a MINI Cooer JCW. Here in Dallas, the last of the SUV and lifted pick up driving a small car is and act bravery. My 1991 Mini takes that to a whole new level.
Look up the articles from the 1950s when consumer credit for car loans started expanding in scope.
Spoiler: people weren’t getting 8 year loans to finance Model T Fords, or 55 Buicks for that matter.
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We also know that vehicles have inflated beyond the added cost of back-up cameras, air bags and so on vs. what that 1970 F100 would cost in “today’s dollars”.
SUV lines are popular in part because so much extra profit is baked into that segment so the dealers & manufacturers want them to be popular. You can’t be tempted by options that are never in stock within hours of where you live…
If the fuel economy tests weren’t so game-able maybe we’d see more manufacturers with small cars.
Your discussion of older model used cars is hilarious for us old folks. I recall when big three cars were so poorly built you were lucky to get five or six years out of them without major, ‘career-ending’ repair bills. The cars on the roads in Toronto then seemed to average about three or four years.
As time went by and Japan got into the North American market, the average car age has become older and older. There are lots of good looking 15 – 20 -year-old daily drivers out there. This says quite a lot about the impact competition has had on quality — all brands.
However, now, with the exception of niche market vehicles (notably pick-em-up-trucks), it is becoming rare to find ‘big three’ cars out there.
My current daily driver is a (bought new) six-year-old Lexus ES 300h, which I’m hoping to keep for 15 years. It may outlive me.
My first new car before starting college was a 2002 Pontiac Sunfire, manual transmission, but it had AC, ABS, and a CD player. Made it through school with just basic maintenance. The cost? $9,200 out the door. It’s a shame that the young generation today will never experience the security of a cheap new car.
I find the best cheap cars are those older people have and they stop driving. families just want to sell and they are often older cars with 4 doors that are not always popular.
When starting out that is all you need. Some may need a little work from sitting but for what you pay you can afford it.