What $40,000 Buys You in the Car Market Now vs. 5 Years Ago
Written by
Lydia Kibet
Edited by
Zuri Anderson
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Five years ago, a $40,000 car budget felt generous. You could walk into a dealership and reasonably get a high-quality vehicle of your choice.
Today, that same budget doesn’t cover the average new car. Here’s how the car buying power of $40,000 compares now versus 2021.
What $40,000 Could Buy in 2021
A $40,000 budget five years ago positioned buyers comfortably in the new car market. According to Kelley Blue Book, the average new vehicle transaction price that year hovered around $42,700, meaning $40,000 could secure competitive options.
“In 2021, such a budget should be able to score a new and well-equipped midsize sedan or compact SUV with advanced safety equipment and some room left over for bargaining,” said Chad Watwood, attorney at LawBike Motorcycle Injury Lawyers.
In the used market, that budget was more than enough to secure late-model SUVs or trucks with low mileage and current safety tech.
What $40,000 Buys You Today
Fast-forward to today, the average new-vehicle transaction price has climbed to about $50,326, according to Cox Automotive.
“With the average new car costing over $50,000 and used-car prices over 30% above pre-pandemic levels, already-stretched consumers continue to hold onto their cars longer, with the average age of light vehicles on U.S. roads climbing to 12.8 years,” said Jeffrey Derman, partner in the consumer retail group at Solomon Partners.
Used cars haven’t been spared either.
“Now, buyers may have to accept more miles, fewer features or older model years for their money,” Watwood added. “You’ll also be at higher risk of injury if your vehicle doesn’t have the latest safety systems, and heavy repair costs can add layers to making an insurance claim after a wreck.”
How Inflation Hit the Auto Market Harder
“General inflation has significantly impacted the auto market. This effect is seen in both new and used vehicles. Over the last few years, car pricing inflation has at times outpaced overall inflation, particularly in the SUV and EV markets,” said Nicholas Struss, product and platform executive at USAWheels. “Aside from general inflation, ownership costs have also gone up due to costs like gas, repairs and insurance.”
Inflation’s impact goes beyond sticker prices. As Derman pointed out, “Tariff-driven price increases represent another inflationary pressure that will likely encourage consumers to hold onto used cars for longer.”
Financing has also become more stressful. The average monthly payment for a new car is now about $770, with “more than one in five new-car buyers committing to a $1,000-plus monthly payment.”
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