Lower-priced new cars are gaining popularity, and not just for cash-poor buyers

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Lower-priced new cars are gaining popularity, and not just for cash-poor buyers

2024-10-22 15:00 Last Updated At：15:10

DETROIT (AP) — Had she wanted to, Michelle Chumley could have afforded a pricey new SUV loaded with options. But when it came time to replace her Chevrolet Blazer SUV, for which she'd paid about $40,000 three years ago, Chumley chose something smaller. And less costly.

With her purchase of a Chevrolet Trax compact SUV in June, Chumley joined a rising number of buyers who have made vehicles in the below-average $20,000-to-$30,000 range the fastest-growing segment of the nation's new-auto market.

“I just don't need that big vehicle and to be paying all of that gas money,” said Chumley, a 56-year-old nurse who lives outside Oxford, Ohio, near Cincinnati.

Across the industry, auto analysts say, an “affordability shift” is taking root. The trend is being led by people who feel they can no longer afford a new vehicle that would cost them roughly today’s average selling price of more than $47,000 — a jump of more than 20% from the pre-pandemic average.

To buy a new car at that price, an average buyer would have to spend $737 a month, if financed at today's average loan rate of 7.1%, for just under six years before the vehicle would be paid off, according to Edmunds.com, an auto research and pricing site. For many, that is financially out of reach.

Yet there are other buyers who, like Chumley, could manage the financial burden but have decided it just isn't worth the cost. And the trend is forcing America's automakers to reassess their sales and production strategies. With buyers confronting inflated prices and still-high loan rates, sales of new U.S. autos rose only 1% through September over the same period last year. If the trend toward lower-priced vehicles proves a lasting one, more generous discounts could lead to lower average auto prices and slowing industry profits.

“Consumers are becoming more prudent as they face economic uncertainty, still-high interest rates and vehicle prices that remain elevated,” said Kevin Roberts, director of market intelligence at CarGurus, an automotive shopping site. “This year, all of the growth is happening in what we would consider the more affordable price buckets.”

Under pressure to unload their more expensive models, automakers have been lowering the sales prices on many such vehicles, largely by offering steeper discounts. In the past year, the average incentive per auto has nearly doubled, to $1,812, according to Edmunds. General Motors has said it expects its average selling price to drop 1.5% in the second half of the year.

Through September, Roberts has calculated, new-vehicle sales to individual buyers, excluding sales to rental companies and other commercial fleets, are up 7%. Of that growth, 43% came in the $20,000-to-$30,000 price range — the largest share for that price category in at least four years. (For used vehicles, the shift is even more pronounced: 59% sales growth in the $15,000-to-$20,000 price range over that period.)

Sales of compact and subcompact cars and SUVs from mainstream auto brands are growing faster than in any year since 2018, according to data from Cox Automotive.

The sales gains for affordable vehicles is, in some ways, a return to a pattern that existed before the pandemic. As recently as 2018, compact and subcompact vehicles — typically among the most popular moderately priced vehicles — had accounted for nearly 35% of the nation's new vehicle sales.

The proportion started to fall in 2020, when the pandemic caused a global shortage of computer chips that forced automakers to slow production and allocate scarce semiconductors to more expensive trucks and large SUVs. As buyers increasingly embraced those higher-priced vehicles, the companies posted robust earnings growth.

In the meantime, they deemed profit margins for lower-prices cars too meager to justify significant production of them. By 2022, the market share of compact and subcompact vehicles had dropped below 30%.

This year, that share has rebounded to nearly 34% and rising. Sales of compact sedans were up 16.7% through September from 12 months earlier. By contrast, CarGurus said, big pickups rose just under 6%. Sales of large SUVs are barely up at all — less than 1%.

Ford's F-Series truck remains the top-selling vehicle in the United States this year, as it has been for nearly a half-century, followed by the Chevrolet Silverado. But Stellantis' Ram pickup, typically No. 3, dropped to sixth place, outpaced by several less expensive small SUVs: the Toyota RAV4, the Honda CR-V and the Tesla Model Y (with a $7,500 U.S. tax credit).

The move in buyer sentiment toward affordability came fast this year, catching many automakers off guard, with too-few vehicles available in lower price ranges. One reason for the shift, analysts say, is that many buyers who are willing to plunk down nearly $50,000 for a new vehicle had already done so in the past few years. People who are less able — or less willing — to spend that much had in many cases held on to their existing vehicles for years. The time had come for them to replace them. And most of them seem disinclined to spend more than they have to.

With loan rates still high and average auto insurance prices up a whopping 38% in the past two years, “the public just wants to be a little more frugal about it,” said Keith McCluskey, CEO of the dealership where Chumley bought her Trax.

Roberts of CarGurus noted that even many higher-income buyers are choosing smaller, lower-priced vehicles, in some cases because of uncertainties over the economy and the impending presidential election.

The shift has left some automakers overstocked with too many pricier trucks and SUVs. Some, like Stellantis, which makes Chrysler, Jeep and Ram vehicles, have warned that the shift will eat into their profitability this year.

At General Motors' Chevrolet brand, executives had foreseen the shift away from “uber expensive” vehicles and were prepared with the redesigned Trax, which came out in the spring of 2023, noted Mike MacPhee, director of Chevrolet sales operations.

Trax sales in the U.S. so far this year are up 130%, making it the nation’s top-selling subcompact SUV.

“We’re basically doubling our (Trax) sales volume from last year,” MacPhee said.

How long the preference for lower-priced vehicles may last is unclear. Charlie Chesbrough, chief economist for Cox Automotive, notes that the succession of expected interest rates cuts by the Federal Rates should eventually lead to lower auto loan rates, thereby making larger vehicles more affordable.

“The trends will probably start to change if these interest rates start coming down,” Chesbrough predicted. “We'll see consumers start moving into these larger vehicles.”

AP Economics Writer Christopher Rugaber in Washington contributed to this report.

King Charles III ends first Australian visit by a reigning British monarch in 13 years

2024-10-22 14:56 Last Updated At：15:00

MELBOURNE, Australia (AP) — King Charles III ends the first visit to Australia by a reigning British monarch in 13 years Tuesday with anti-monarchists hoping his journey is a step toward an Australian citizen becoming head of state.

Controversy interrupted the visit on Monday when Indigenous independent senator Lidia Thorpe yelled at Charles during a reception that he was not her king and Australia was not his land.

Esther Anatolitis, co-chair of the Australian Republic Movement, that campaigns for an Australian citizen to replace the British monarch as Australia’s head of state, said while thousands turned out to see the king and Queen Camilla at their public engagements, the numbers were larger when his mother Queen Elizabeth II first visited Australia 70 years ago.

An estimated 75% of Australia’s population saw the queen in person during the first visit by a reigning British monarch in 1954.

“It’s understandable that Australians would be welcoming the king and queen, we also welcome them,” Anatolitis said. “But it doesn’t make any sense to continue to have a head of state appointed by birth right from another country.”

Anatolitis acknowledged that getting a majority of Australians in a majority of states to vote to change the constitution would be difficult. Australians haven’t changed their constitution since 1977.

“It’s tricky, isn’t it? We’ve got that hurdle, of course,” Anatolitis said.

Constitutional lawyer Anne Twomey said an Australian republic was not something that Charles, 75, need worry about in his lifetime.

She said the failure of a referendum last year to create an “utterly innocuous” Indigenous representative body to advise government demonstrated the difficulty in changing Australia’s constitution.

“It’s just that on the whole people aren’t prepared to change the constitution,” Twomey said.

“So a republic, which would be a much more complex constitutional question than the one last year, would be far more vulnerable to a scare campaign and to opposition,” she said.

“So unless you had absolutely unanimous support across the board and a strong reason for doing it, it would fail,” she added.

Philip Benwell, national chair of the Australian Monarchist League, which wants to maintain Australia’s constitutional link to Britain, said he was standing near Thorpe at the Canberra reception when she started yelling at the king and demanding a treaty with Indigenous Australians.

“I think she alienated a lot of sympathy. If anything, she’s helped to strengthen our support,” Benwell said.

Thorpe has been criticized, including by some Indigenous leaders, for shouting at the king and failing to show respect.

Thorpe was unrepentant. She rejected criticism that her aggressive approach toward the monarch was violent.

“I think what was unacceptable is the violence in that room, of the King of England praising himself, dripping in stolen wealth, that’s what’s violent,” Thorpe told Australian Broadcasting Corp. “The violence is from the colonizer being in that room asserting his authority, being paid for by every taxpayer in this country.”

Australian Prime Minister Anthony Albanese wants Australia to become a republic but has ruled out a referendum during his first three-year term. A vote remains a possibility if his center-left Labor Party wins elections due by May next year.

Australians decided in a referendum in 1999 to retain Queen Elizabeth II as head of state. That result is widely regarded to have been the consequence of disagreement about how a president would be chosen rather than majority support for a monarch.

Sydney University royal historian Cindy McCreery suspects Australia is not yet ready to make the change.

“There's interest in becoming a republic, but I think what we may forget is that logistically speaking we're not going to have a referendum on that issue any time soon," McCreery said.

“I, as a historian, think that it's probably not realistic to expect a successful referendum on a republic until we've done more work on acknowledging our ... complicated history,” she said.

“Becoming a republic doesn't mean that we've somehow thrown off British colonialism. It hopefully has meant that we're engaging with our own history in an honest and thoughtful way,” she added.

Charles and Camilla’s Tuesday began watching Indigenous dancers perform at a Sydney Indigenous community center. The couple used tongs to cook sausages at a community barbecue lunch at the central suburb of Parramatta and later shook the hands of well-wishers for the last time of their visit outside the Sydney Opera House. Their final engagement was an inspection of navy ships on Sydney Harbor in an event known as a fleet review.

Charles's trip to Australia was scaled down because he is undergoing cancer treatment. He arrives in Samoa on Wednesday.