The American car market is becoming increasingly exclusive. While wealthy buyers continue to purchase newer, more expensive vehicles, those with lower incomes are being pushed out of the market for new cars. This shift is turning automobiles into a luxury item, reserved for the elite, leaving many buyers with fewer choices and forcing them to turn to the used car market.
This transformation in the U.S. car market has been unfolding for several years, largely driven by rising prices and the changing income distribution of car buyers. Historically, cars in the U.S. were much more affordable than in Europe, with pickup trucks and muscle cars being especially popular. However, the landscape has changed dramatically. Today, the profile of the average car buyer has shifted, and with it, the structure of the automotive market.
Rising Prices Push Out Lower-Income Buyers
The price of new cars in the U.S. has soared, making them increasingly out of reach for many buyers. In 2025, the average price of a new vehicle reached $51,000, a significant jump from just a few years ago. This trend mirrors a broader global phenomenon where prices of vehicles are outpacing income growth. According to Cox Automotive, the median salary in the U.S. rose by 24% over the past four years, while the cost of new cars increased by 30%. This disparity has led to a sharp reduction in the number of lower-income buyers purchasing new cars.
As a result, many consumers, particularly those earning under $100,000 a year, have been forced to reconsider their car-buying options. The share of new car buyers with incomes below $100,000 dropped from 50% in 2020 to just 37% in 2025, while the number of buyers with incomes above $200,000 increased from 18% to 29% over the same period. These figures reflect a growing divide, with wealthier buyers dominating the market for new vehicles.
The Vanishing Affordable Models
The shift toward more expensive vehicles is also evident in the shrinking availability of entry-level models. Historically, even modest buyers could afford a new car, often opting for compact city cars or more economical models. However, these vehicles are increasingly disappearing from car manufacturers’ catalogs, especially those priced lower than $25,000. According to industry experts, the disappearance of affordable models has left many lower-income buyers with limited choices.
For instance, vehicles that once catered to modest households, such as compact sedans and small hatchbacks, have largely been phased out of production. The trend is especially concerning for those whose income falls below $65,000 a year, as they now have access to only about 110 models considered “affordable.” On the other hand, consumers earning over $105,000 have access to more than 250 models. This stark contrast highlights the widening gap between different income groups in terms of access to new vehicles.
The Shift to the Used Car Market
Faced with rising prices and fewer affordable new models, many lower-income households are turning to the used car market. This shift is causing a decline in new car sales, which in turn puts pressure on the U.S. automotive industry. According to Plante Moran, a third of Americans can no longer afford a new car, forcing them to buy second-hand vehicles, reports l’Auto Journal. This has significant implications for the industry, which has long been a cornerstone of the U.S. economy. Fewer new car sales mean less capital for research and development, potentially slowing technological advancements, especially in the electric vehicle sector.
In 2025, new car sales in the U.S. fell to 16.3 million units, a noticeable drop from the 17 million units regularly sold before 2020. The move toward used cars, while providing a solution for budget-conscious buyers, signals a shift away from innovation and modernization in the U.S. car market. As Chinese manufacturers continue to advance their electric vehicle technology, American companies could find themselves further behind.
