Where Have All The $20,000 Cars Gone? And Why Are They A Dying Breed?

We are currently witnessing the slow death of the sub-$20,000 new car. Just three 2023 model year vehicles existed at this price point (including destination fees), but in recent weeks, that number has dwindled down to one. The Mitsubishi Mirage, which starts at $16,245 ($17,340 with destination), will reportedly be killed off at the end of the year, though Mitsubishi has yet to confirm it officially. In more concrete news, the 2023 Kia Rio, which starts at $16,750 ($17,805 with destination), will not return for 2024.

This leaves only one car, the 2023 Nissan Versa, that truly starts under $20,000. The Versa already owned the title for America's most affordable new car at $15,980 ($17,075), and it can soon tout being the only sub-$20,000 vehicle left standing. What happened to all of the cars that used to compete in this price category? And will they ever come back?

There are many factors that contributed to the death of the affordable car, many of which come from the automaker side. But consumers are not completely innocent here because they demand more features with each passing year. Even cheap vehicles like the Versa now come with Apple CarPlay and safety technology such as automatic emergency braking. Some of these innovations were mandated by law, including backup cameras (starting in 2018) and anti-lock braking with electronic stability control (starting in 2012). These mandates have made cars safer and more efficient but have driven up prices.

Even when an automaker tries to sell a car with minimal features, consumers tend to add them back with higher trim levels and options. Although the Versa is available for under $20,000, the average transaction price is higher. For example, the base Versa S ships with a five-speed manual transmission, an option few buyers are willing to live with. Opting for the automatic pushes the price to $18,745 with destination, and upgrading to either the SV or SR trim pushes the number to over $20,000.

Then there's the used car debate. Why buy a Versa with just 122 horsepower when, for the same price, you could likely get an Altima or Camry with more space and more power?

Crossovers and SUVs have taken over as the dominant body style in the US market, and these vehicles are more expensive to produce than their sedan and hatchback counterparts. The 2023 Hyundai Venue claims the title of cheapest crossover at $19,650, but destination brings the price to $20,795. This model debuted back in 2020 for under $19,000, but that model had a manual transmission that has since been discontinued - and Hyundai has raised the MSRP with each subsequent model year.

In response to consumer demand for crossovers, companies like Ford and General Motors completely abandoned making regular cars. This killed affordable models like the Fiesta, Spark, and Sonic, all of which used to be available for less than $20,000. The blame here falls partially on automakers for killing off sedans and hatchbacks but also on consumers who gravitated too hard toward crossovers.

Until automakers crack the code on cheaper batteries, electric vehicles will be more expensive to produce compared to gas-powered cars. Battery technology is rapidly evolving, but it's difficult to predict any sub-$20,000 EVs being made available in the next five to 10 years, at least not in the US. Other markets like Japan have kei cars like the Nissan Sakura, but they could never be sold stateside due to their small size, lack of power, and limited safety features. A Chinese EV called the Kandi K27 is reportedly coming with a $17,499 price tag, but it will only be available in California and is limited to a 63 mph top speed.

Stellantis is reportedly working on an affordable EV under $25,000, but union demands may make this goal difficult to achieve. GM did announce that a new Bolt is coming, but we don't know how affordable it will be. In the realm of EVs, $30,000 seems to be the new $20,000.

We've already covered this in another article, but inflation is an obvious reason why the $20,000 car has all but disappeared. $20,000 in 2023 is not the same as it was back in 2003, making it seem as if cars have become more expensive when they have actually remained pretty level (or have become cheaper). A 2003 Mazda MX-5 Miata cost exactly $20,000, but that translates to $33,829 in today's money. A brand-new Miata can be purchased for $28,050, so the car has actually become more affordable, not less.

As we pointed out in that previous article, wages have not kept up with inflation. Median household income has lagged so far behind that the average household is missing over $27,000 per year. If that money went into workers' pockets rather than towards record corporate profits, maybe cars would seem more affordable.

Regardless of the reasons, it seems that the $20k car will never come around again.

When talking about vehicle affordability, it's easy to forget that shoppers rarely make their purchase based on MSRP. Instead, most buyers search for a monthly payment that meets their budget. If the base Versa with a stick shift came out to around $350 per month for a 60 month loan, but the larger, more powerful Sentra with an automatic is only around $50 more, many shoppers would be willing to pay a bit extra to upgrade. The salesperson will likely even tell them a cliche about how they could have the better car for less than the cost of going to Starbucks a few times per month. Having fewer affordable cars is still a net negative, but it may not be the travesty some people might imagine.