Before Henry Ford launched the Model T in 1908, owning an automobile was a luxury for the affluent. The industry is coming full circle, based on the latest analysis of market trends by Cox Automotive.
As supply chain snafus crippled vehicle production over the past three years, U.S. automakers eliminated lower-priced sedans and concentrated their available semiconductors on building high-priced pickups and SUVs.
The result: New vehicles priced below $30,000 accounted for just 14% of sales in 2022, down from 54% in 2012. Vehicles priced above $50,000 – call them “luxury vehicles” even though many are blue-collar brand pickup trucks – had a 39% share of total sales last year, up from just 6% in 2012.
Rising interest rates amplify the shift. Cox data show that monthly payments and interest charges for consumers with lower credit scores have soared. A buyer with a sub-prime FICO credit score of 580 is paying $1,180 a month, reflecting a 19.4% interest rate, for a $50,000 vehicle. (That vehicle price looks high, but it is close to the current average selling price in the U.S. market.)
A buyer with a strong 760 FICO score would pay $835 on a 6.3% note for the same vehicle, Cox found.
Cox analyst Charlie Chesbrough said this shift toward luxury-priced vehicles and affluent buyers is driving fundamental changes in the U.S. vehicle industry. Pre-pandemic, U.S. new car and light truck sales ran at a rate close to 17 million vehicles a year. This year, Cox forecasts a market of 14.2 million – barring a recession.
Automakers have said pent-up demand built up during the 2021-2022 supply chain crisis will give sales a boost. Chesbrough said the data on prices and loan costs call that into question. Less affluent Americans have left the new vehicle market, he said.
