Why buying a car got so expensive

Today, up to 1 million Americans are effectively shut out of the market for new cars and light trucks. Vehicles have simply become too expensive for many lower-income households. The average cost of a new vehicle is around $50,000, up roughly 20% from just four years ago. To compound things, used car prices are also near record highs, averaging about $32,000 for a three-year-old vehicle. What’s going on?

The long-term decline in vehicle affordability is the result of poor government policy, costly union contracts, macroeconomic pressures, and changing consumer preferences.

Detroit automakers have intentionally phased out many smaller, affordable cars and light trucks. These entry-level vehicles generate very thin profit margins. The Big Three automakers simply cannot justify building large numbers of small cars, given high labor costs, increasingly complex regulatory requirements, and uncertainty surrounding government policy from one presidential administration to the next. Expensive union contracts and policy uncertainty have pushed vehicle manufacturers to