Quick Read
Ford (F) F-150 starts at $38,780 but climbs to $45,000 with modest features, pricing out buyers as average new vehicles now top $51,000.
Bain and Company projects US new-car sales will collapse from 16 million annually today to just 2 million by 2040.
Erik Severinson, Volvo’s chief commercial officer, says people being unable to buy new cars reflects something fundamentally wrong in the broader economy.
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There is growing expert consensus that car sales in the US will start to decline and may drop sharply. Bain and Company has done some of the best work on this. The consulting firm said US new-car sales could drop to 2 million by 2040, according to CNBC. There are about 16 million a year today.
Cars, SUVs, and light pickups are too expensive. Car Edge reports that the average price of a new vehicle has hit over $50,000. Cox Automotive puts the figure at $51,440 based on MSRP. While it depends on which company’s data is chosen, it is up 4% from last year.
2025 Ford Explorer Active (facelift), front 12.20.24 by Kevauto / BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/)
The average monthly payment for a new car is $770. Many loans are for 72 months. This means a car can be worth less than the loan on it after five or six years. The math itself will erode the new car industry.
To some extent, if not largely, due to prices, the average time a car is on the road in the US is 12 years. It is easy to see the challenge for the car companies.
The Ford (NYSE: F) F-Series pickup has been the best-selling vehicle in the US for decades. Its base price is $38,780. With a modest number of features added, the price rises to $45,000.
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There is another factor worth considering. Inflation is moving up faster than wages. This means that, for the most part, Americans’ purchasing power is declining.
The average lifetime of an F-150 is 15 to 20 years. That means the truck can run for well over 200,000 miles.
Bain’s other argument is that as immigration drops, the US population growth will be flat. Additionally, only half of US 16-year-olds have a driver’s license. That is down from 70% in 1966 to 1980.
Finally, The Wall Street Journal reports that about one million Americans will drop out of the car market soon. The newspaper quoted Erik Severinson, Volvo’s chief commercial officer. Speaking of car prices, he said, “It’s a proof point of something more fundamental which is wrong in the general economy—that people are not able to buy new cars.”