The article discusses challenges facing the U.S. auto industry as car buyers trend toward wealthier demographics. Wealthy consumers are increasingly purchasing new vehicles at higher prices, while lower-income individuals are more likely to opt for used cars, highlighting a “K-shaped” economy where the rich thrive and the less affluent struggle.
Data from Cox Automotive indicates a significant decrease in new car buyers with incomes under $100,000, dropping from 50% in 2020 to 37% last year, while buyers with incomes over $200,000 grew from 18% to 29%. This shift is attributed to rising vehicle prices, projected to average $51,000 by 2025, along with increased insurance premiums and inflation.
Auto executives express concern about the affordability crisis, with a study suggesting one-third of Americans can’t afford new cars. Households with incomes below $105,000 can access more affordable models compared to those under $65,000. The median U.S. household income has increased by 24% since 2020, yet the average transaction price for new cars rose by 30% in the same period.
Industry leaders like Ford’s CEO Jim Farley emphasize the need to focus on affordability to avoid alienating consumers. While larger, more expensive vehicles may drive profit, doing so risks shrinking the market and negatively impacting sales.
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