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Alexis Madrigal: Welcome to Forum. I’m Alexis Madrigal. Buying an automobile is confusing these days. On the one hand, some countries around the world have gone headlong into electric vehicles—China, Norway, Sweden, Vietnam, a bunch of others. They’re rapidly transforming their automotive systems. Then there’s the United States, which, under the Trump administration, is doubling down on internal combustion vehicles.
That doesn’t mean cars are affordable. Get this: the average new car sales price has spiraled up over the last seven years—from $36,000 in 2018, which was already a lot, to about $50,000 now. And as this is all happening, the price of gas is skyrocketing because of the war in Iran.
Here to talk with us about what’s happening, we’ve got Edward Loh, head of editorial at MotorTrend, an automotive media company. Welcome.
Edward Loh: Thanks for having me. Great to be here.
Alexis Madrigal: We’ve got Scott Moura, who’s a professor in civil and environmental engineering and acting director of the Institute of Transportation Studies at UC Berkeley. Welcome, Scott.
Scott Moura: Hey, Alexis. Happy to be here.
Alexis Madrigal: And we’ve got Jessica Caldwell, who’s head of insights at Edmunds, an automotive information and car-buying website. Welcome.
Jessica Caldwell: Hi, good morning. Thanks for having me.
Alexis Madrigal: So let’s start with cost. I mean, $50,000—being anywhere around that for the price of a new car—it’s just not where my brain is anchored. What happened? How did we get here?
Edward Loh: That’s a great question. I think you can look at a lot of the technology being added to vehicles, particularly in the time frame you referenced. Anyone who’s in an older car and then gets into a newer one from the last two or three years will notice how large and numerous the screens are. They’re massive, and they can do a ton of things.
You can watch videos—usually when you’re parked—take Zoom or Teams calls, install apps, listen to Spotify. There’s just a lot more functionality.
Alexis Madrigal: I’ve got to say, though—is that $14,000 worth of change? You can get a 70-inch high-definition TV for $500. Your phone is doing most of the processing. I get that that’s the nominal reason, but does it feel worth it to you? If you went back to a car from eight years ago, would you feel like you were in the Stone Age?
Edward Loh: No. First of all, I feel you. I’m sort of appalled every time I get into some of these vehicles—even ones that are supposed to be on the lower end. There’s definitely sticker shock, even for someone who works in the new car space.
I think Jessica could probably speak to this better, but part of what’s going on is the skew of the product mix. Automakers want higher margins, so they’re pushing features that come in at the top end—and that’s driving the average transaction price up.
Jessica Caldwell: Yeah, to add to that—Americans like larger vehicles. Back in the 2008 recession, Detroit automakers were criticized for not having enough small, fuel-efficient cars. So they introduced more compact and subcompact models.
But when the economy improved, nobody wanted them. If you look at Detroit lineups today, they barely have any traditional cars left—mostly trucks and SUVs, with a few sports cars.
When times are good, Americans want bigger vehicles with more amenities. Over the 2010s, financing was cheap, loans got longer, and interest rates were low. So vehicles just kept getting bigger and more expensive. Automakers make more money on those, so they leaned into it. In a way, we got ourselves here.
Alexis Madrigal: Jessica, I have to say—when companies say, “People just want our more expensive, higher-margin products,” that raises my eyebrows a bit. There are lots of ways automakers can influence what people buy. Did they, in some sense, steer people away from cheaper cars?
Jessica Caldwell: I think we like the bells and whistles. Car buying is emotional. You walk in with a budget, but then you’re at the dealership and think, “For $10, $20, $30 more a month…”—because that’s how people think—you can get something much nicer.
You start imagining your life in that car—the big screens, the features—and suddenly you’re signing up for a bigger loan. And when interest rates are low, you can stretch that loan to 72 or even 84 months. It doesn’t feel like much more per month, but it adds up. That mindset shows up in a lot of American spending.
Alexis Madrigal: Edward, let me ask about supply. During the Biden administration, there was a lot of talk about semiconductor shortages. Automakers canceled chip orders early in the pandemic, then couldn’t get them back when demand returned. That meant fewer cars available.
To what extent did that supply crunch drive up prices? Was it just that there were fewer cars, so companies realized people would pay more?
Edward Loh: It’s a good question. The pandemic supply chain issues were a wild time. The chip shortage, in particular, forced automakers to rethink which features mattered.
It wasn’t things like window switches—everyone uses those. It was features like self-parking systems. About a decade ago, manufacturers thought everyone would want them. But many people don’t use them—they’re slow, and Americans like things to happen quickly.
So companies cut some of those features to reallocate chips elsewhere. Then, when demand came back, there was also a sense of “we’ve been through a tough time, let’s reward ourselves.”
As Jessica said, automakers are reactive. They respond to what consumers—and dealers—are willing to buy. Dealers, in a sense, are the manufacturers’ first customers. They relay what shoppers want, and that shapes what gets built.
Alexis Madrigal: We’re talking about how rising car prices and fuel costs are affecting the U.S. auto market. We’ve got Edward Loh, head of editorial at MotorTrend, and Jessica Caldwell, head of insights at Edmunds.
When we come back, we’ll hear more from Scott Moura, professor of civil and environmental engineering and acting director of the Institute of Transportation Studies at UC Berkeley. We’ll also talk about gas prices and how they’re shaping the car market.
We want to hear from you. Have you bought a car recently, or are you in the market? What’s your experience—sticker shock included? How about rising gas prices—are they affecting you? Have you switched cars for other reasons in the past?
Give us a call at 866-733-6786. That’s 866-733-6786. You can email forum@kqed.org or find us on social media—we’re @KQEDForum.
I’m Alexis Madrigal. Stay tuned.
