How Expensive are New Cars?

January 5, 2021

People often comment about how much new vehicles cost. And there is definitely some truth to those statements. The average new car transaction price in 2020 was almost $37,000. Or to look at it another way, financing that amount for 6 years at 6% interest would mean paying $600 per month over the next 72 months for your shiny new ride.

$600 per month can be a pretty hard pill to swallow for a lot of people. And that amount doesn’t include license, insurance, or any other fees.

Pretty scary numbers, for sure. But they don’t tell the whole story. There are many popular vehicles such as full size pickups and SUV’s that can sell for upwards of $50,000, which will obviously affect the average new car price that’s reported.

So what about new vehicles at the other end of the spectrum? What kind of car can you buy for, say $20-25,000, which is well below the average transaction price?

A surprisingly capable one, it turns out. Budgeting $25,000 will get you into one of the latest compact SUV’s such as the Kia Seltos or Mazda CX3. Financing one of those over the same 6 year period would give you a payment of a much more palatable $400 per month, assuming no money down. Reducing your budget to $20,000 (around $325 per month) will still get you into a well-appointed compact sedan like a Honda Civic or Toyota Corolla. Admittedly not the most exciting form of transportation, but still a brand new car, with full warranty and the latest safety features. 

If all this still sounds like a lot of money, well it is. But how does it compare with new cars from 20-25 years ago?

In 1994, Car & Driver magazine tested the all-new Dodge Neon. They were curious to know exactly what a basic compact car actually offered in terms of driving experience and features. Looking over the specs for the model they tested, it shows a very basic car, with the only amenities being power windows and air conditioning. At the time, the Neon did have decent power and performance, but nothing like the economy cars of today. In terms of safety, dual airbags were standard, but anti-lock brakes were an option. The MSRP for the basic Neon was $11,500, which sounds like a pretty good bargain. However, if you adjust the price for inflation, that same car would cost approximately $20,000 in today’s dollars. So basically, for the same amount of money, you can buy a new vehicle today that is immensely better in nearly all aspects, including efficiency, safety, performance, and reliability. Something to think about when you are shopping for your next new car so you don’t get the dreaded “sticker shock.”

Clarity Automotive Group is your personal “Car Buying Advocate.” We assist our clients with navigating the complicated and often frustrating process of buying vehicles. We are based in Billings, Montana and also serve the surrounding areas of Bozeman, Miles City, Helena, Great Falls, and Lewistown, as well as Cody, Lovell, and Sheridan, Wyoming.

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