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 spike in average prices is not merely a reflection of larger, more luxurious models gaining popularity. It is also the result of fewer low-cost options on the market. The 2025 Nissan Versa, once priced around $18,000, marked the last affordable vehicle before Nissan discontinued it in December 2025. Other entry-level models like the Mitsubishi Mirage and the Kia Forte had already been phased out in 2024, leaving consumers with minimal budget-friendly choices.
Factors driving the affordability crisis
Multiple factors have combined to push new car prices higher, as automakers now contend with increased production expenses driven by tariffs, supply chain hiccups, and escalating material costs. President Donald Trump’s 25% tariffs on imported vehicles and auto parts intensified these pressures, especially for overseas-made models operating with slimmer profit margins. While many manufacturers chose to absorb much of the added cost to retain buyers, the least expensive models could no longer remain financially viable.
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 impact of a K-shaped market
The disappearance of affordable vehicles underscores broader economic trends in the United States. The “K-shaped” recovery has left lower- and middle-income households struggling, while wealthier buyers continue to spend freely. Households earning less than $75,000 accounted for just 26% of new car sales in 2025, down from 37% in 2019. Meanwhile, buyers with annual incomes above $150,000 now represent over 40% of new car purchases, up 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 responding with incentives to compete for buyers in this tighter market. Discounts, financing deals, and trade-in offers are increasingly being used to attract consumers who might otherwise turn to one- or two-year-old used vehicles. Analysts suggest these incentives may gradually ease affordability pressures, though they are unlikely to restore entry-level pricing to pre-pandemic levels.
What buyers can expect
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, emphasizes that buyers are increasingly concerned about monthly payments rather than sticker prices alone. The shift reflects changing consumer priorities and financial realities, underscoring the importance of financing strategies in the current 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 must now move through this landscape with caution, weighing affordability, accessibility, and the sector’s financial sustainability, and for the moment, the period of genuinely low-priced new vehicles seems to have ended, pushing buyers to adjust to a marketplace shaped by costlier models and fewer alternatives.
