I wonder if there's a smaller, third reason for the disappearance of these cars from the market. Statistics in recent years show far fewer teens getting drivers licenses than previous generations. To the extent that these cars (new or used) were often for new drivers, if that market is shrinking that might contribute.
I've *always* wanted a small car, preferably a sedan or hatchback. My last wagon, as a young parent, was a Toyota Corolla (which was discontinued eons ago). I've had two more cars since then, and each time they're bigger -- both wider and longer, even though they've both been sedans/hatchbacks.
This has other real-word consequences. I live in a house built in 1905, with a kitchen/garage underneath added on sometime around the 1920s or 30s. My Toyota wagon fit easily in there. The VW Passat was wider, but still manageable for 2 people to enter from the garage. My current (and possibly last) car is a Nissan Leaf, which screams at me entering and exiting my garage because of how close I am to the edges. I have to pick up any passenger outside the garage. It feels -- and drives -- more like a mini SUV than a sedan.
Great article. I noticed the extinction of the starter car and I am well aware of how zoning laws make it difficult to build more affordable housing but I had not put these two factors together and how it affects the car-centric standard of living
I remember once seeing a graph that, when inflation is taken into account, cars had actually gotten cheaper from 1970-2015 or something like that. I wonder if that is still valid, or if they're trying to calculate like-for-like, or how those assumptions change. I wonder if the response to the 1970s oil crisis was to make cars smaller (and therefore cheaper), whereas now to prep for the next oil crisis it's to take advantage of new technologies (EVs) that haven't matured and are therefore more expensive.
Either way, i think the post is spot on when talking about how, in concert with housing and land use, this does make it expensive just to be alive in modern America. We may live in relative health and luxury compared to our grandparents, but I imagine we have greater financial struggles - we are more "cash poor" - than they were. As a new parent, I look further at how convenient it was to cram multiple kids in a station wagon once upon a time but now each one is required to be in a space-consuming car seat that further necessitates large vehicles or smaller families. And while child mortality has decreased, the realest and most mortal risk to kids is when crossing the street - necessitating far more supervision than previous generations of parents had to give. So not only are we cash poor, if you're a parent you're time poor too.
Don't get me wrong - the good old days weren't good, just old. And some of the safety regulations do make lives safer, healthier and longer. But the pressures of American sprawl, regulations, and the calculations of the car industry combine to put new pressures on us - financially and otherwise - that should be taken seriously as more than just "niche" or "online" issues
Looking through historical data, the average cost of a new car back in 1970 was $3,543, and the median family income was $9,870. This means that a new car cost about 36% of the median family income in 1970. For 2019, the same data estimates that the average cost of a new car was around $36,000, and the median family income was $60,336. This means that a new car cost about 59% of the median family income in 2019. Based on this comparison, cars have become more expensive relative to the average income since 1970.
This all makes sense if you consider the U.S. dollar is a fiat currency.
Thanks for writing this. Comparing the auto markets to the housing market is interesting although we can build our way out of the need to own a car. The cost of buying a used or new car does seem very damaging to filling many lower level job openings.
Car size is purely about consumer demand; you or I may think that borrowing money to buy a $70,000 gas-guzzler is nuts, but that's what people these days both want and can afford. Consumers, on average, have more money than they once did; I can remember when the federal minimum wage was $5.15 an hour, now starting pay of $17-$20 per hour at McDonalds is standard on the coasts. I'm also fairly certain that the number of vehicles per capita in the USA is at, or very near an all-time high. It's hard to discern a lack of affordability when people have more of the things than they ever did before.
Hand-wringing about the absence of "starter homes" is also questionable. There's plenty to complain about the grotesque American mass-produced sprawl-stroad landscape, but the homeownership rate is pretty much spot-on the historical average. And house prices have absolutely refused to decline despite a tripling of effective prices (monthly mortgage payments). Obviously, the hand-wringers are either missing something big, or there are lags in play which will ultimately force a correction (in falling prices, or smaller homes being built) via market mechanisms.
Great observation. It reminded me of when traveling outside US, I notice small displacement motorcycles. Like houses and cars, motorcycles in the US are much bigger than elsewhere.
To your last point, I used to give presentations discussing the lowly hot-dog stand owner by the side of the road that is common in some places, especially poorer places. My comment was, “let’s admit it. We all drive by and feel sorry for him.” But yet, that’s what the first rung of the ladder looks like. That’s just someone trying to figure it out, make a buck, and see if he can make more tomorrow. I do think we, those of us especially in the professional class, have a hard time confronting what starter-anything is like in the real world.
I really think the recent unaffordablity of cars is an undertold story. There have been articles written about about the cost of gas for the past 20 years, and they've all pretty much been the same article. Person spends X amount on gas, usually because of their commute. But car prices, insurance, interest, and car repairs have all gone up recently and substantially. And a majority of places in America all but require a car to live there. These costs are absolutely going to constrain choices and force people into tough situations.
I absolutely think the car market is a place the government needs to intervene more. On the one side in order to have any hope of reaching our climate goals we need to be ensuring smaller and more efficient vehicles continue to get produced. On the other, we need to be limiting the production of large vehicles to reach out climate goals and to ensure the safety of everyone on the road. I sometimes feel absolutely unsafe looking at the size of some of the trucks on the road.
"His point is that there is a sort of inexorable logic of getting richer and demanding more safety and comfort and convenience, and that this has real benefits but also subtle costs."
Tata Motors came out with the Nano for $2,500 in 2008, at least that was what the articles at the time said, wikipedia lists it with a launch price of $1,300. Was there a market for this car in the US? Who would even know because at the time it was said that to bring it up to US safety standards would add like $9K bringing it pretty close to the lowest end sticker price cars at the time. I also once saw what I believe was a Reason video interview with a former automotive engineer where he claimed a K car with a modern engine would get close to 70 miles per gallon. Car Seats as contraception is also an important point in the tradeoff of safety against other choices: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3665046
In Australia we are already there and we were there a decade ago. Sydney is the third most expensive place to buy a house after London and Hong Kong. Our three bedroom 70s starter home in the suburbs has 50 times the value in real terms than when it was built. If your a young family on a moderate income (teacher, nurse, accountant etc) your options are rent a house in a ridiculously tight market and spend the equivalent of a small mortgage payment on rent for year-to-year rental agreements, OR you buy a new but slapped up 2 bed apartment in the boonies on a maxed out mortgage but already you won’t have to move every 12 months. Most of these new builds don’t even have basic fire protection mechanisms built in as mandated by the code and cost the owners a BOMB to retrofit them.
Our car market is also ridiculous. You can’t get a new station wagon for love of money or sense. We still have a market for small hatchbacks (as we call them) but they aint cheap anymore and practically unaffordable. Just about every new car sold is either a Ute (pickup truck) or a pointless underpowered front wheel drive SUVs. Our second hand market was already tight and Covid just sent it mad because of the shipping and logistical shutdowns. We have no local manufacturing which offshored a decade ago.
Let’s get real - the economics of the auto business have driven US auto maker strategy and decisions since, well the 80’s. Smaller cars = smaller profits. That’s why the Japanese and Koreans now dominate small car sales though even the Japanese are moving to sell larger cars. Economics is a bitch - it don’t care how you feel.
Great piece! Here in Hawaii, we have a higher proportion of seniors, some who can't safely drive any more, but some who still can.
Price increases for smaller passenger cars due to lower supply makes it even harder for seniors and their caretakers. For those who still can safely drive, they might not be able to handle a larger vehicle or might have difficulty getting into amd out of one.
While larger vehicles such as SUVs and vans can have nice add-ons like wheelchair lifts, many seniors here or their caretakers cannot afford them.
The effect that lower supply has on affordability is a key factor, and one doesn't have to live in Hawaii to be affected by it. More importantly, it is the most vulnerable who are hurt most, be they poor, older, suffering from a physical condition, or a combination
YES, Addison, to this: "It’ mostly been covered as automotive news, or as financial news, but it’s a much, much bigger story" | I am one who bought a Bolt in the last few months before they were discontinued. (It is an incredible car, and I have never been an American car fan.) I am also one who covers climate-impacting topics that need much, much bigger stories around them. Thanks for your eye and writing. You inspire me.
I am retired in Asia and drive a small Korean car. There is still a spectrum of choices here as to vehicle size, full size truck or SUV-sure, sub compact, many choices.A new fully loaded small Toyota is available for around 18000 USD. With fuel around five dollars a gallon small is good.
In 2008, my Jaguar left me stranded by the side of the road one too many times, and I marched into the local Toyota dealer and said I wanted to buy the cheapest new car on the lot. I am still driving that Yaris, which runs perfectly well. I have decided to give it to the 17 year old daughter of a friend, who needs transportation to school and work in an underserved transit area, and have been looking around for another car. I am gobsmacked by the prices. This economy is crushing the younger generation, between education costs, housing costs (including rentals as well as purchases), health care, cars, et al. The resulting alienation, anger, and fear may have dire consequences for us all.
I wonder if there's a smaller, third reason for the disappearance of these cars from the market. Statistics in recent years show far fewer teens getting drivers licenses than previous generations. To the extent that these cars (new or used) were often for new drivers, if that market is shrinking that might contribute.
That’s a good point. There’s also fewer teens over all as the population has declined.
My grandson, who is now 32, didn't get his license until he was 25. I couldn't wait until I was 16, so I could get my license. Times have changed.
I've *always* wanted a small car, preferably a sedan or hatchback. My last wagon, as a young parent, was a Toyota Corolla (which was discontinued eons ago). I've had two more cars since then, and each time they're bigger -- both wider and longer, even though they've both been sedans/hatchbacks.
This has other real-word consequences. I live in a house built in 1905, with a kitchen/garage underneath added on sometime around the 1920s or 30s. My Toyota wagon fit easily in there. The VW Passat was wider, but still manageable for 2 people to enter from the garage. My current (and possibly last) car is a Nissan Leaf, which screams at me entering and exiting my garage because of how close I am to the edges. I have to pick up any passenger outside the garage. It feels -- and drives -- more like a mini SUV than a sedan.
Great article. I noticed the extinction of the starter car and I am well aware of how zoning laws make it difficult to build more affordable housing but I had not put these two factors together and how it affects the car-centric standard of living
I remember once seeing a graph that, when inflation is taken into account, cars had actually gotten cheaper from 1970-2015 or something like that. I wonder if that is still valid, or if they're trying to calculate like-for-like, or how those assumptions change. I wonder if the response to the 1970s oil crisis was to make cars smaller (and therefore cheaper), whereas now to prep for the next oil crisis it's to take advantage of new technologies (EVs) that haven't matured and are therefore more expensive.
Either way, i think the post is spot on when talking about how, in concert with housing and land use, this does make it expensive just to be alive in modern America. We may live in relative health and luxury compared to our grandparents, but I imagine we have greater financial struggles - we are more "cash poor" - than they were. As a new parent, I look further at how convenient it was to cram multiple kids in a station wagon once upon a time but now each one is required to be in a space-consuming car seat that further necessitates large vehicles or smaller families. And while child mortality has decreased, the realest and most mortal risk to kids is when crossing the street - necessitating far more supervision than previous generations of parents had to give. So not only are we cash poor, if you're a parent you're time poor too.
Don't get me wrong - the good old days weren't good, just old. And some of the safety regulations do make lives safer, healthier and longer. But the pressures of American sprawl, regulations, and the calculations of the car industry combine to put new pressures on us - financially and otherwise - that should be taken seriously as more than just "niche" or "online" issues
Looking through historical data, the average cost of a new car back in 1970 was $3,543, and the median family income was $9,870. This means that a new car cost about 36% of the median family income in 1970. For 2019, the same data estimates that the average cost of a new car was around $36,000, and the median family income was $60,336. This means that a new car cost about 59% of the median family income in 2019. Based on this comparison, cars have become more expensive relative to the average income since 1970.
This all makes sense if you consider the U.S. dollar is a fiat currency.
All of this!
Thanks for writing this. Comparing the auto markets to the housing market is interesting although we can build our way out of the need to own a car. The cost of buying a used or new car does seem very damaging to filling many lower level job openings.
Car size is purely about consumer demand; you or I may think that borrowing money to buy a $70,000 gas-guzzler is nuts, but that's what people these days both want and can afford. Consumers, on average, have more money than they once did; I can remember when the federal minimum wage was $5.15 an hour, now starting pay of $17-$20 per hour at McDonalds is standard on the coasts. I'm also fairly certain that the number of vehicles per capita in the USA is at, or very near an all-time high. It's hard to discern a lack of affordability when people have more of the things than they ever did before.
Hand-wringing about the absence of "starter homes" is also questionable. There's plenty to complain about the grotesque American mass-produced sprawl-stroad landscape, but the homeownership rate is pretty much spot-on the historical average. And house prices have absolutely refused to decline despite a tripling of effective prices (monthly mortgage payments). Obviously, the hand-wringers are either missing something big, or there are lags in play which will ultimately force a correction (in falling prices, or smaller homes being built) via market mechanisms.
Great observation. It reminded me of when traveling outside US, I notice small displacement motorcycles. Like houses and cars, motorcycles in the US are much bigger than elsewhere.
To your last point, I used to give presentations discussing the lowly hot-dog stand owner by the side of the road that is common in some places, especially poorer places. My comment was, “let’s admit it. We all drive by and feel sorry for him.” But yet, that’s what the first rung of the ladder looks like. That’s just someone trying to figure it out, make a buck, and see if he can make more tomorrow. I do think we, those of us especially in the professional class, have a hard time confronting what starter-anything is like in the real world.
I really think the recent unaffordablity of cars is an undertold story. There have been articles written about about the cost of gas for the past 20 years, and they've all pretty much been the same article. Person spends X amount on gas, usually because of their commute. But car prices, insurance, interest, and car repairs have all gone up recently and substantially. And a majority of places in America all but require a car to live there. These costs are absolutely going to constrain choices and force people into tough situations.
I absolutely think the car market is a place the government needs to intervene more. On the one side in order to have any hope of reaching our climate goals we need to be ensuring smaller and more efficient vehicles continue to get produced. On the other, we need to be limiting the production of large vehicles to reach out climate goals and to ensure the safety of everyone on the road. I sometimes feel absolutely unsafe looking at the size of some of the trucks on the road.
"His point is that there is a sort of inexorable logic of getting richer and demanding more safety and comfort and convenience, and that this has real benefits but also subtle costs."
Tata Motors came out with the Nano for $2,500 in 2008, at least that was what the articles at the time said, wikipedia lists it with a launch price of $1,300. Was there a market for this car in the US? Who would even know because at the time it was said that to bring it up to US safety standards would add like $9K bringing it pretty close to the lowest end sticker price cars at the time. I also once saw what I believe was a Reason video interview with a former automotive engineer where he claimed a K car with a modern engine would get close to 70 miles per gallon. Car Seats as contraception is also an important point in the tradeoff of safety against other choices: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3665046
In Australia we are already there and we were there a decade ago. Sydney is the third most expensive place to buy a house after London and Hong Kong. Our three bedroom 70s starter home in the suburbs has 50 times the value in real terms than when it was built. If your a young family on a moderate income (teacher, nurse, accountant etc) your options are rent a house in a ridiculously tight market and spend the equivalent of a small mortgage payment on rent for year-to-year rental agreements, OR you buy a new but slapped up 2 bed apartment in the boonies on a maxed out mortgage but already you won’t have to move every 12 months. Most of these new builds don’t even have basic fire protection mechanisms built in as mandated by the code and cost the owners a BOMB to retrofit them.
Our car market is also ridiculous. You can’t get a new station wagon for love of money or sense. We still have a market for small hatchbacks (as we call them) but they aint cheap anymore and practically unaffordable. Just about every new car sold is either a Ute (pickup truck) or a pointless underpowered front wheel drive SUVs. Our second hand market was already tight and Covid just sent it mad because of the shipping and logistical shutdowns. We have no local manufacturing which offshored a decade ago.
https://www.caranddriver.com/features/g39175084/10-cheapest-new-cars-in-2022/
Let’s get real - the economics of the auto business have driven US auto maker strategy and decisions since, well the 80’s. Smaller cars = smaller profits. That’s why the Japanese and Koreans now dominate small car sales though even the Japanese are moving to sell larger cars. Economics is a bitch - it don’t care how you feel.
Great piece! Here in Hawaii, we have a higher proportion of seniors, some who can't safely drive any more, but some who still can.
Price increases for smaller passenger cars due to lower supply makes it even harder for seniors and their caretakers. For those who still can safely drive, they might not be able to handle a larger vehicle or might have difficulty getting into amd out of one.
While larger vehicles such as SUVs and vans can have nice add-ons like wheelchair lifts, many seniors here or their caretakers cannot afford them.
The effect that lower supply has on affordability is a key factor, and one doesn't have to live in Hawaii to be affected by it. More importantly, it is the most vulnerable who are hurt most, be they poor, older, suffering from a physical condition, or a combination
YES, Addison, to this: "It’ mostly been covered as automotive news, or as financial news, but it’s a much, much bigger story" | I am one who bought a Bolt in the last few months before they were discontinued. (It is an incredible car, and I have never been an American car fan.) I am also one who covers climate-impacting topics that need much, much bigger stories around them. Thanks for your eye and writing. You inspire me.
I am retired in Asia and drive a small Korean car. There is still a spectrum of choices here as to vehicle size, full size truck or SUV-sure, sub compact, many choices.A new fully loaded small Toyota is available for around 18000 USD. With fuel around five dollars a gallon small is good.
In 2008, my Jaguar left me stranded by the side of the road one too many times, and I marched into the local Toyota dealer and said I wanted to buy the cheapest new car on the lot. I am still driving that Yaris, which runs perfectly well. I have decided to give it to the 17 year old daughter of a friend, who needs transportation to school and work in an underserved transit area, and have been looking around for another car. I am gobsmacked by the prices. This economy is crushing the younger generation, between education costs, housing costs (including rentals as well as purchases), health care, cars, et al. The resulting alienation, anger, and fear may have dire consequences for us all.