‘I just keep seeing a lot of different aspects of life getting more expensive’: New car prices are up 30% over 6 years

New car prices are up 12.6% year over year, with average new vehicles now near $50,000 and monthly payments around $775, while the share of vehicles under $30,000 has fallen to about 13% from 40% five years ago. Used-car affordability has also worsened, with sub-$30,000 used inventory down to 69% from 78% in 2021 and average used payments at $560. The article points to persistent inflation, tariffs, higher insurance and repair costs, and a shift toward larger SUVs and pickups as key pressures on auto affordability.

Analysis

The key macro signal is not just “cars are expensive,” but that the affordability ladder in autos is collapsing from both ends: new supply is being steered toward higher-margin trucks/SUVs while used supply is being structurally throttled by longer retention and fewer lease returns. That combination is supportive for vehicle gross margins in the near term, but it is progressively shifting demand away from financed purchases and into cash purchases, which lowers the industry’s addressable market and raises conversion friction for the lowest-income cohort. In other words, unit growth is becoming more dependent on credit availability than on true household income growth.

Second-order pressure is building in the financing channel. Longer loan terms can mask affordability but increase negative-equity risk, which typically shows up later as weaker trade-in values, higher delinquency, and softer replacement demand once the credit cycle turns. That argues for the strongest near-term profitability in brands with scale and product mix pricing power, while more rate-sensitive, value-oriented OEMs and used-car intermediaries face a tougher volume backdrop if consumers become payment-constrained rather than price-constrained.

The contrarian read is that the headline pain may be peaking before the full earnings impact does. A chunk of the demand shift is being deferred, not destroyed: consumers are extending holding periods, buying outright, or waiting for leased EVs and off-lease supply to wash into the used market over the next 6-18 months. If inflation cools and auto insurance stabilizes, some of the affordability drag will ease quickly; the bigger risk is a credit contraction or job-market rollover, which would convert today’s “stretching” behavior into outright demand destruction.

For autos, the policy overhang matters: tariff-driven cost inflation and election-year rhetoric around affordability increase the chance of targeted incentives or political pressure on manufacturers to reintroduce sub-$30k models. That would likely compress margins before it meaningfully restores unit growth, so the first beneficiaries of any relief would be consumers and dealers rather than OEM equity holders.

Key Decisions for Investors

• Short CARG on a 3-6 month horizon: the market is underestimating that the affordability squeeze reduces transaction velocity and inventory turnover, even if pricing remains resilient; use strength to build, with a target on any used-car supply normalization bounce.
• Long GM vs short F lean into the mix/pricing divergence: GM has more optionality from lower-priced nameplates and EV/compact repositioning, while Ford remains more exposed to truck mix saturation and affordability-driven volume compression; hold 6-12 months.
• Buy put spreads on F for the next 2-4 earnings cycles: the setup is for margin resilience masking weaker unit growth, and any consumer credit deterioration would hit the stock through a multiple compression rather than an immediate earnings miss.
• Pair long GM / short STLA as a relative-value trade over 6 months: GM’s domestic scale and product cadence should better absorb pricing pressure, while STLA’s exposure to high-priced vehicles and Europe-linked consumer softness leaves less room for error.
• If looking for a tactical catalyst trade, own CARG downside into the next consumer credit or auto sales data print; the best entry is on rallies tied to temporary inventory headlines, since the structural issue is demand affordability, not just supply.