Car buyers pay more, get more for their money
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New car payment shock is real, but it's not the car — it's the cost of financing that hurts so much.
Why it matters: Everyone complains about vehicle affordability, but car prices, adjusted for inflation, haven't changed much in a decade, according to experts at Cox Automotive.
Driving the news: Cox's annual midyear automotive review out Wednesday features an interesting perspective on affordability from executive analyst Erin Keating.
- Her take: car prices aren't as crazy as they seem.
Zoom in: Consider the Honda CR-V, one of America's most popular SUVs.
- The average transaction price for an entry-level CR-V (LX trim) is about $11,000 higher today than it was in 2016, climbing from about $28,000 to roughly $39,000.
- "On paper, that stings," she said.
- Adjusted for inflation, however, that CR-V should cost about $38,300. Instead, it's $38,778 — a difference of $478.
- "That's basically a rounding error, suggesting the price of the vehicle has remained consistent for 10 years," Keating said.
The intrigue: Even with the modest uptick, car buyers are getting far more value in today's high-tech vehicles than they did a decade ago.
- The 2026 version of the CR-V is far better equipped than 2016's LX.
- It now comes with standard equipment and features that weren't available then — a more powerful turbocharged engine, a nine-inch touchscreen, wireless Apple CarPlay, push-button start and a full suite of safety technologies.
The big picture: Features that were high-priced options a decade ago — automatic emergency braking, lane departure warning and rear cross traffic alert, for example — now come standard even on base models because consumers reward brands with high safety ratings.
- Consumers also expect conveniences like CarPlay, built-in WiFi and remote start to be included for free. And most say they wouldn't pay extra to get them, according to a Cox survey of car buyers.
Reality check: Hardly anybody buys base models.
- Instead, more than 80% trade up to more expensive trim levels to get even more premium features, which means they're paying roughly $7,200 more than the advertised starting price, or MSRP, Cox found.
- It's not a trick, said Keating. "The base models exist. Manufacturers build them and put them on the lot. Consumers just don't choose them."
- One example: The Toyota RAV4 starts around $32,000, but the average transaction price is closer to $41,000 because buyers gravitate to the XSE and Limited hybrids.
The real culprit behind higher car payments is the cost of borrowing, said Keating.
- Auto loan interest rates increased from 6.5% to 9.5% over the past decade, driving up monthly payments by $282, to an average $753.
- And that doesn't include the cost of insurance, maintenance or gasoline — all of which are driving up the cost of car ownership.
The bottom line: Car payments are higher, but "the vehicle isn't the villain," said Keating. "It's a symptom of the broader cost-of-living squeeze."
Cox Automotive is owned by Cox Enterprises, Axios' parent company.
