For many Americans, owning a new car under $20,000 has become a thing of the past. As entry-level models disappear from dealer lots, the average cost of a new vehicle has skyrocketed, leaving lower-income buyers with fewer options and reshaping the automotive landscape.
In 2024, US consumers still had access to a handful of vehicles priced below $20,000. Today, however, not a single new car falls under that threshold. According to recent estimates from Kelley Blue Book, new car buyers paid an average of $50,326 in December 2025, a record high. Edmunds reported a slightly lower, but still staggering, average of $49,466. These figures highlight a broader trend: the erosion of affordable vehicles is pushing the average cost of new cars far beyond what many buyers can comfortably afford.
The rise in average prices isn’t solely driven by the growing appeal of bigger or more upscale models; it also stems from the shrinking availability of low-cost alternatives. The 2025 Nissan Versa, which had hovered near $18,000, stood as the final budget-friendly option until Nissan ended its production in December 2025. Entry-tier vehicles such as the Mitsubishi Mirage and the Kia Forte had already exited the market in 2024, leaving buyers with very few economical selections.
Key forces shaping today’s affordability crunch
Several forces have converged to drive the price of new cars upward. Automakers face higher production costs due to tariffs, supply chain disruptions, and rising material prices. President Donald Trump’s 25% tariffs on imported vehicles and auto parts contributed to the rising costs, particularly affecting cars produced abroad with thinner profit margins. Many manufacturers absorbed these extra expenses to avoid losing customers, but the most affordable models could not survive economically.
The pandemic’s lingering impact still shapes market prices, as supply bottlenecks, semiconductor scarcities, and transportation hurdles have redefined the auto sector, driving costs upward and setting a lasting price floor above pre-pandemic norms. Erin Keating, executive analyst at Cox Automotive, notes that these forces have permanently transformed vehicle pricing, introducing enduring changes that influence consumers across all income levels.
Consequently, the most affordable new car on sale in early 2026 is the Hyundai Venue, which starts at $20,550, and although it comes nearest to pre‑pandemic affordability, its cost remains well above the entry-level options of just a few years ago, adding further strain on budget-conscious buyers.
The implications of a K-shaped marketplace
The disappearance of affordable vehicles highlights wider economic patterns across the United States. A “K-shaped” recovery has pushed lower- and middle-income households into greater financial strain, even as affluent buyers maintain robust spending. Households earning under $75,000 made up only 26% of new car purchases in 2025, dropping from 37% in 2019, while those with annual incomes above $150,000 now account for more than 40% of new vehicle sales, rising from 29% in 2019.
This divide appears clearly in how consumers act, with many lower-income buyers choosing pre-owned cars or keeping their vehicles for extended periods, while higher-income purchasers increasingly select larger SUVs and upscale options; together, these patterns underscore the expanding separation between affluent shoppers and those under financial strain, emphasizing the mounting difficulties automakers face when attempting to attract the market as a whole.
Ivan Drury, director of insights at Edmunds.com, notes that the absence of entry-level vehicles has made virtually every new car on the market a “luxury purchase” in practical terms. Buyers are now forced to stretch their budgets, often financing vehicles far beyond what would have been considered affordable just a few years ago. Monthly payments that previously covered a mid-size car may now only cover a compact vehicle, illustrating the rising burden on consumers.
Consequences for dealerships and consumers
The dwindling availability of budget-friendly cars affects not only consumers but also the dealerships that serve them, as retailers now encounter a clientele increasingly dominated by higher-income shoppers while those with lower incomes are effectively priced out. This shrinking customer pool forces automakers into a competitive landscape where they must navigate the tension between sustaining profits and ensuring broader accessibility.
For Americans who cannot afford a new vehicle, transportation challenges multiply. Limited access to reliable cars can hinder commuting, child care, and daily errands, especially in regions lacking robust public transportation. Many consumers are now dependent on used vehicles, which come with their own risks and costs, or must extend the life of older cars, increasing maintenance burdens.
Automakers are countering the tighter market by rolling out incentives designed to draw buyers. Growing numbers of discounts, financing promotions, and trade-in bonuses aim to entice consumers who might otherwise choose used models just one or two years old. Analysts note that while these incentives could slowly relieve some affordability strain, they are unlikely to return entry-level prices to what they were before the pandemic.
What prospective buyers may anticipate
Industry experts foresee a slight dip in average prices for 2026, with projections indicating a reduction of roughly $500. Although this marks progress toward more accessible pricing, the persistent scarcity of budget vehicles continues to pose difficulties. Those looking for new cars may still encounter restricted choices and increased monthly costs, making thoughtful budgeting and careful review of financing terms essential.
The auto industry’s focus on higher-end, profitable models leaves a question mark over the future availability of affordable cars. Competing brands may capitalize on this gap, targeting consumers willing to prioritize cost over brand loyalty. Yet for the broader market, especially households at the lower end of the income spectrum, the trend toward higher-priced vehicles continues to restrict access to new cars.
Tyson Jominy, senior vice president of data and analytics at J.D. Power, notes that buyers are now focusing more on managing their monthly payments than on the sticker price itself, a change that highlights evolving consumer priorities and financial pressures while reinforcing how crucial financing strategies have become in today’s market.
Ultimately, the disappearance of sub-$20,000 vehicles reflects broader economic pressures, including increasing manufacturing expenses, tariffs, lingering post-pandemic disruptions across supply chains, and a growing divide between affluent and lower-income Americans. Although incentives and slight price drops might ease the burden for some buyers, affordable entry-level cars will likely remain limited for the foreseeable future, gradually redefining what vehicle ownership looks like in the United States.
Consumers, dealerships, and policymakers will need to navigate this reality carefully, balancing affordability, accessibility, and industry profitability. For now, the era of truly low-cost new cars appears to be over, leaving buyers to adapt to a market dominated by higher-priced options and more limited choices.
