The Demise of the Cheap, Small Car
The average new vehicle is now $48,000. And huge.
AP (“Looking for a new car under $20,000? Good luck. Your choice has dwindled to just one vehicle“):
Just five years ago, a price-conscious auto shopper in the United States could choose from among a dozen new small cars selling for under $20,000. Now, there’s just one: The Mitsubishi Mirage. And even the Mirage appears headed for the scrap yard.
At a time when Americans increasingly want pricey SUVs and trucks rather than small cars, the Mirage remains the lone new vehicle whose average sale price is under 20 grand — a figure that once marked a kind of unofficial threshold of affordability. With prices — new and used — having soared since the pandemic, $20,000 is no longer much of a starting point for a new car.
This current version of the Mirage, which reached U.S. dealerships a decade ago, sold for an average of $19,205 last month, according to data from Cox Automotive. (Though a few other new models have starting prices under $20,000, their actual purchase prices, with options and shipping, exceed that figure.)
The Mirage, with hatchback and sedan versions, costs less than half of what the average U.S. new vehicle does. That average is now just above $48,000 — 25% more than before the pandemic struck three years ago.
These pieces should use inflation-adjusted dollars to make comparisons meaningful. $20,000 today translates to $17,321 in 2020 (pre-COVID) and $16,847 in 2018 (five years ago) dollars. A 25% increase in three years sounds wild, until you factor in 18% inflation in the overall economy. $38,400 (the 2020 price) is $45,503 in today’s dollars.
Regardless, $48,000 a lot of money for most people.
After an anecdote about a little old lady looking to buy a new, small car we get this:
The scarcity of small cars at dealerships helps explain why the average new vehicle costs so much: Detroit’s Big Three automakers — General Motors, Stellantis and Ford — began to jettison the compact and subcompact car business about five years ago. Low profit margins for small cars and consumers’ increasing shift to SUVs and trucks made the decision an easy one. Likewise, Toyota and Honda later halted U.S. sales of their subcompacts.
Then a pandemic-related computer-chip shortage slashed global auto production. Vehicles were suddenly in short supply at a time of high demand. Prices shot up.
So, while pandemic-related pressures are part of the reason for sticker shock, the main issue is that the base product is changing. Customers are demanding bigger, more expensive vehicles. (And not just in America.) And even those who aren’t demanding them are being left with little choice because manufacturers are making more money on the widely popular vehicles.
Another factor that has swollen average prices is that 32 models in the United States now have selling prices above $100,000, according to Cox. As recently as 2018, only 12 models sold for over 100 grand.
Again, this is useless information. We’ve had 23% inflation since 2018. This explosion in $100,000 vehicles may well just be a function of cars that were $81,000 remaining flat in real pricing.
After more anecdotes about people frustrated by rising prices, we get this:
At White Bear Mitsubishi near St. Paul, Minnesota, where Schaeppi bought her vehicle, used cars are the main competition for the Mirage, according to Richard Herod III, the dealership’s managing partner. But because so few new small cars were sold in recent years, he said, the used-vehicle selection is low and prices are high.
A new Mirage, which costs about the same as a 4-year-old Chevrolet Cruze or Mazda 3, has a five-year, 60,000-mile bumper-to-bumper warranty. Most used cars that age, Herod said, no longer include such warranties. The Mirage gets roughly 39 miles to the gallon, among the highest of any vehicle in the United States that isn’t hybrid or electric.
Still, the horsepower in its three-cylinder engine amounts to a tepid 76.
“It’s not going to win any drag races,” Herod said. “It’s not going to make you more popular at school. It’s the last honest affordable car in America.”
Despite the low price, U.S. sales of the Mirage have been sluggish. Mitsubishi sold only 5,316 in the first half of the year — 44% below the same period in 2022.
By contrast, the most popular vehicle for five decades running, the Ford F-150 pickup, sold 653,957 copies last year.
And it might not be available at all in a couple of years. The trade publication Automotive News reported last week that Mitsubishi will stop selling the Mirage by mid-decade. Mitsubishi, part of the Nissan-Renault alliance, declined to comment. But its website says production of the Mirage in Thailand, where it is built, is ending.
Once the Mirage disappears, Mitsubishi’s least expensive vehicle would be the Outlander Sport small SUV. It starts around $24,600, which includes shipping.
While that still sounds cheap, it’s a 25% increase in cost. That’s huge.
But $20,000 is an arbitrary number. There are several models slightly above that:
Even as the Mirage appears likely to be phased out, some other cars and SUVs have average sales prices only slightly above $20,000. They include the Kia Rio, the Nissan Versa, the Hyundai Venue and the Nissan Sentra. According to Cox, their prices range from $20,157 for the Rio to $23,994 for the Sentra.
Which are all cheaper than the Outlander Sport.