I saw a headline recently from Kelley Blue Book that made it sound like new car prices were finally going down. It said “new cars grew easier to afford” in March 2026. However, the first sentence dashed this hope: “new car prices are rising.”
So what’s with the headline? Well, reports show that income growth has finally started to outpace the rising price of new cars. The average vehicle price in March was 3.5% higher than a year ago, but the average buyer’s income was 3.9% higher. This means more Americans are hopefully earning enough to buy a new car. At least eventually. It’s not like a person can buy a new car right when they get a new job or a raise.
However, Kelley Blue Book also noted that more Americans are qualifying for car loans in March than since June 2022. Monthly car payments are also dropping. They were $752 in March, down a whopping 0.5% from the previous month. However, this is still 3% higher than March 2025. Still… Paying less doesn’t hurt, right?
The argument is that the cost of a car is more than its price. I agree, but it feels a bit disingenous to say that new cars are easier to afford now.
New car prices are still rising, but automakers want to slow it down
Unfortunately, new car prices are still rising. While tariffs, safety regulations, electric vehicle components, competition, and all that junk are partially to blame, Reuters recently reported that it’s due to a trend it has seen from most major automakers: the budget models are disappearing. The average price in the United States is higher because brands are offering bigger and more luxurious models.
“We’re buying more expensive vehicles. We’re buying more trucks and SUVs. We’re buying more loaded vehicles,” said Tyson Jominy, a Senior Vice President at J.D. Power.
Automakers are trying to appeal to more affluent customers. The average American struggles to buy even $40,000 models, and most carmakers have trouble getting even lower than that. Meanwhile, wealthier Americans haven’t really been impacted by any recent economical troubles and continue to buy cars. Welp, might as well create more options for active buyers. I assume that’s what automakers think, anyway. Seems like a win for automakers, who see a larger profit margin on large SUVs compared to compact options.
This means fewer base models as well. Higher trims with more features give automakers a larger profit margin. Honda even eliminated the Civic LX, the base model, significantly increasing the entry-level price of its more attainable model. Kia also canceled the base model of the EV6, making its new entry-level trim a lot more money.
However, automakers have started to notice that this plan isn’t working out either. Luxury SUVs are often sitting in dealership lots for months and months. Many carmakers have frantically cut back on previous EV promises as fewer Americans buy electric. Ford is notoriously working on an EV lineup for 2030 that has no models exceeding $40,000, inspired by the Chinese cars CEO Jim Farley continues to publicly push back on. Nissan recently admitted that the brand “lost its way” as it attempted to pack more and more features and tech into its vehicles. Now, it’s working on a bare-bones, no-frills off-roader for 2028. Jeep is making add-ons far les expensive, with the CEO telling Reuters that it needs to “unlock some of the things” people love about Jeep at a more affordable price point.
Is a new era of affordability coming to the United States? Luxury brands will always exist (and they aren’t concerned). But more versatile carmakers are becoming aware that the general public isn’t refusing to buy compact, affordable cars. They just can’t pay for them. I don’t think legacy automakers can compete with China’s EV prices, but it seems like $40,000 is the new sweet spot. Hopefully more people will see a salary bump and be able to make it happen. They have a few years to save up.
