Why cheap cars are disappearing from dealer showrooms

Why cheap cars are disappearing
Why cheap cars are disappearing

The category of new cars costing less than $20,000 has shrunk in recent years, and it may keep younger buyers out of the market for a car, pushing them further toward ride-sharing and other forms of transportation.

Data from J.D. Power shows that sales of cheap cars fell off a cliff in recent years, despite the fact that overall car sales have been strong. In 2013, sales of cars costing less than $20,000 made up 20.1% of total annual new car sales. By 2020, that figure was 9.4%.

One reason for the drop is the steady thinning of the subcompact and compact car segments, from which many sub-$20,000 cars came. Those have been replaced by subcompact and compact sport utility vehicles, which tend to have slightly higher sticker prices starting at or just above $20,000.

Of course, with auto sales at or near record highs in recent years, there has been little pressure to sell less-profitable vehicles, which subcompact and compact cars tend to be.

But cheaper cars are valuable for bringing young buyers into a brand and building loyalty over a lifetime. Some auto industry analysts say that by choosing to sell more expensive vehicles, automakers risk leaving money on the table in the future.