Affordability is top of mind for consumers as the new year starts, with less than half of Americans (46%) feeling financially confident and consumers citing a range of economic concerns, including inflation, job insecurity and rising interest rates.
Financial concerns, however, are being met with pent-up demand for new vehicles from the inventory shortage that began in 2021 and is just now beginning to ease.
The result is a robust car-buying market of cost-conscious consumers and the timely launch of car-shopping marketplace Cars.com's first-ever Affordability Report.
"The compounding effects of inventory shortages, economic uncertainty and industry challenges have made value one of the most sought-after features in a vehicle," said Jane Ulitskaya, Cars.com news editor. "Electric vehicles and new technologies will continue to dominate the media and capture our attention, but affordability is the trend that's propelling today's car shoppers."
The Cars.com Affordability Report empowers car shoppers with data-driven insights about comparative vehicle pricing, the trade-in market and financing trends, and it uncovers a potential disconnect between consumer expectations and current market conditions.
More than 70 currently available vehicles were evaluated by model, trim, features, fuel efficiency or a minimum range requirement for EVs and compared against the median price for each category.
Best Value Cars for 2023
- Small Car: 2023 Kia Rio S with Technology Package, $20, 240
- Small SUV: 2023 Chevy Trailblazer LS with Driver Confidence Package, $23,440
- Small Pickup Truck: 2023 Ford Maverick XL with Co-Pilot360 Package, $26,660
- EV/Plug-in Hybrid: 2023 Chevy Bolt EV 1LT with Driver Confidence Package, $28,330
A Cars.com survey of in-market shoppers indicates more than half plan to purchase a new vehicle, and one in four expects to spend less than $20,0002, a figure that might prove challenging considering the median new-car price was more than twice that at the end of 2022.
"A growing preference for larger, costlier vehicles is driving shoppers to lean on a combination of long-term savings, flexible financing terms and the trade-in market to bridge the gap between the right car and the right price," said Ulitskaya. "Many who typically purchase new models are taking a fresh look at the used-car marketplace, which is sustaining the demand for trade-in inventory."
Trading In
The Affordability Report also provides insights that help consumers understand how they can afford to pay for a car and the value of trading in a vehicle. As used-car prices spiked amid the inventory shortage, trade-in values followed suit, hitting record highs by mid-2022 before leveling out.
Approximately 40% of in-market shoppers will trade in a current car before purchasing a new one, and of those looking to buy used, 76% are looking for a model no more than five years old.
As part of the Affordability Report, Cars.com experts examined trade-in values for available used vehicles from model-year 2018 and identified the best same-model upgrade values---notably they are all electric vehicles. Used EVs are trending much more affordable now than they were a year ago.
The top three 2018 models with the best trade-in value include:
1. Chevrolet Bolt EV (62% of new purchase price)
2. Honda HR-V (59%)
3. Toyota Prius Prime (57%)
Saving Up and Paying Out
Two-thirds of current shoppers aim to save between three and 12 months for a vehicle, most planning to accumulate 10%-25% of the final price before purchase, and nearly half anticipate a down payment of less than $5,000. Where both new- and used-car shoppers will be the most surprised is with their interest rate.
Gone are the days of super low rates. Typically strong credit earns a better rate; however, even those with very good credit are now routinely receiving financing offers with double-digit interest rates, and those with non prime and subprime credit profiles are seeing rates between 20%-30% with shorter financing terms.
Notably, among those with a super-prime credit rating (800-plus), the average interest rate is still high at 8%.
In 2022, Cars.com launched new digital financing tools and offered new ways for shoppers to sell their current car to a local dealership. The technology helps shoppers understand what they can afford, get preapproved for a loan, determine what their current car is worth and claim an instant offer from a local dealership.
Fuel Prices: Tanks and No Tanks
Though gas prices have since settled from the headline-grabbing highs of 2022, affordability in the form of fuel expense remains a major consideration for shoppers and a key component in the Affordability Report's analysis. Aside from the top-ranked EVs and plug-in hybrids, which all had calculated first-year fuel costs between $600 and $1,100, the most fuel-efficient gas-powered vehicle among the finalists is the Hyundai Elantra, with an estimated first-year fuel expense of $1,350.
For more information on the 2023 Cars.com Affordability Report, including a deeper dive into the data and methodology, visit Cars.com.
Source: Cars.com
