New cars are increasingly becoming a luxury amid K-shaped economic concerns

DETROIT – American consumers are facing a crossroads when it comes to the American auto industry. Affluent buyers are buying new cars at increasingly higher prices, while lower-income buyers continue to purchase used models.

The trend is a growing concern for auto industry executives and fuels concerns that American consumers are facing a “K”-shaped economy, in which the wealthy continue to see gains while those with lower incomes suffer.

“We have a different car buyer today than we did just a few years ago,” Charlie Chesbrough, chief economist at Cox Automotive, said Thursday during an auto analysis event. “The key takeaway here is that we see that the average buyer here is much more affluent.”

Cox notes that the share of new car buyers with incomes of less than $100,000 fell from 50% in 2020 to 37% last year, representing millions in lost sales. On the other end of the spectrum, the share of buyers with incomes over $200,000 rose from 18% to 29% during this time frame.

This shift occurred as the Manufacturer’s Suggested Retail Price, or MSRP, reaches an average of $51,000 in 2025, according to Cox, and as buyers also deal with rising insurance costs and inflation. At the same time, consumer sentiment has reached recessionary levels.

New car sales were at record levels of more than 17 million before 2020, but have seen mixed results since then, ending 2025 with sales of 16.3 million. New cars were never available to the majority of U.S. consumers, but automakers increasingly began underpricing millions of Americans, including by cutting lines of entry-level cars such as minivans.

“We are now relying on the very wealthy to make sales,” Mark Parrott, a partner at consulting firm Plante Moran, said during Thursday’s event. “This is a structural problem from an affordability perspective.”

Parrott said US sales have not reached record numbers but are still good compared to historical levels. He added that auto executives may start to pay more attention if market conditions tighten as buyers price out.

He added: “It is not unrealistic to think that we could reach this level in the next two or three years, and then this will really start to hurt the team.” [automakers]He said.

A modeling study by Plante Moran found that a third of the U.S. population cannot afford new cars, with very limited options for those who may be on the fence. According to the study, there are roughly 110 “affordable” models, in relative terms, for household incomes of $65,000 or less compared to more than 250 “affordable” models for those with incomes of $105,000.

The median household income in the United States was $83,730 in 2024, according to the U.S. Census Bureau. This is up 24% since 2020, when it was $67,521.

Meanwhile, average U.S. transaction prices for new cars were hovering around $50,000 at the end of last year, up 30% from less than $38,747 to start 2020, according to Cox Automotive.

Car Max Edmunds reported this month that new car buyers are increasingly spending monthly on purchasing a new vehicle, with 20% committing to average monthly payments of more than $1,000 during the fourth quarter of last year.

Ford CEO Jim Farley warned earlier this month that the U.S. auto industry needs to be mindful of affordability concerns that are driving consumer pushback. While producing larger, more expensive cars can be more profitable for automakers, it can lead to a shrinking market and lower sales.

“Anybody in the auto industry… we all have to be very careful about consumer demand,” Farley said Jan. 13 during an event at the Detroit Auto Show. “This is really important.”