Image credit: Cox Automotive.
Vehicle affordability is reshaping the U.S. automotive market, with consumers increasingly adjusting what they buy, or delaying purchases altogether.
In an Oct. 12 analysis, Cox Automotive Chief Economist Jeremy Robb said demand has not disappeared, but rising household expenses are changing where it is concentrated. Since the pandemic, personal incomes have increased approximately 48 per cent, while expenses have climbed 53 per cent, leaving consumers with less flexibility for vehicle purchases.
The divide is particularly evident between income groups. Households earning $250,000 or more remain active new-vehicle buyers, while consumers with tighter budgets are increasingly considering older used vehicles or extending ownership cycles.
Hybrids are also benefiting from the shift. According to Cox Automotive, the average new hybrid costs approximately $5,000 less than the overall new-vehicle market average, offering buyers a combination of lower purchase prices and improved fuel efficiency.
Meanwhile, demand for older used vehicles remains strong. The average used vehicle on a dealer lot was priced just above $27,000, up seven per cent year over year. Prices for vehicles eight to 10 years old increased nearly 10 per cent.
The changing market also presents challenges for dealers as older used inventory requires careful acquisition, inspection and reconditioning, while longer financing terms can introduce additional risks.
Affordability pressures extend across the industry, with tariffs, supply chain uncertainty and rising operating costs limiting how much additional expense automakers and dealers can absorb.
Robb said consumers continue to need transportation, but are making different choices based on their financial circumstances, including trading down in vehicle segments, choosing hybrids or keeping their vehicles longer.
The U.S. findings highlight how affordability pressures can influence vehicle demand across different price points and segments.
