1 in 5 Americans is now committing to a $1,000+ monthly car payment. How did we get here?
Been researching the full story of how new car prices got to $50,000 average and the dealer markup section was genuinely surprising to me.
The chip shortage, dealer markups, Fed rate hikes, the truck market dragging the average up , it all stacked on top of each other in a way that I don't think most people fully understand. The part that got me was, in 2016 the average new car cost $34,000. Today it's $50,000. That's a $16,000 jump in under 10 years on a product that hasn't gotten dramatically better.
During the shortage, dealers were adding $5,000–$10,000 market adjustments above MSRP on popular trucks and SUVs. Some were going higher. Average buyer discount went from 20% below MSRP to literally zero overnight.
Dealers had record profit years in 2021 and 2022 while selling fewer cars than ever. That's an extraordinary business outcome.
Now that inventory has recovered the markups have largely gone away and incentives are back ,Cox Automotive says average discount returned to about $3,958 per vehicle by late 2024.But prices never came back down. The market found a new floor during the shortage and stayed there.
From people who work in the industry ,how much of the current $50,000 average is structural vs cyclical? Is there any realistic scenario where prices return to pre-pandemic levels?