Looking for a new car under $20,000? Good luck. Your choice has dwindled to just one vehicle

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In the not-so-distant past, roughly five years ago, budget-conscious car buyers in the United States had a wide array of choices when it came to selecting a modern small car under the $20,000 mark. However, the landscape has undergone significant changes, leaving only one contender standing: the Mitsubishi Mirage. Yet, even the future of the Mirage appears uncertain.

In an era where American consumers increasingly favor pricier SUVs and trucks over smaller vehicles, the Mirage stands as the sole new car with an average sale price below the $20,000 threshold. This figure was once seen as a benchmark for affordability, but the surge in prices triggered by the pandemic has fundamentally altered the starting point for purchasing a new car.

Recent data from Cox Automotive reveals that the latest generation of the Mirage, which arrived in U.S. dealerships a decade ago, achieved an average sale price of $19,205 last month. While a few other new models boast starting prices under $20,000, their actual transaction costs, including add-ons and delivery, exceed this benchmark.

Offering both hatchback and sedan variants, the Mirage is priced at less than half the cost of the average new car in the U.S., where the current average hovers above $48,000. This marks a 25% increase compared to pre-pandemic levels three years earlier.

Karen Schaeppi from suburban Minneapolis serves as an example of this shift in consumer sentiment. Despite having the financial means to afford an average-priced new car, she opted for a red Mirage sedan priced at around $19,000. Her decision was driven by practicality, as her petite stature of five feet led her to choose a smaller car for improved visibility.

However, Karen’s experience is not unique. The scarcity of small cars at dealerships provides insight into the overall rise in average car prices. The major Detroit automakers—General Motors, Stellantis, and Ford—abandoned the compact and subcompact car market about five years ago due to slim profit margins and growing consumer preference for SUVs and trucks. This trend was quickly mirrored by Toyota and Honda.

The supply shortage caused by the pandemic-induced chip crisis further exacerbated the situation, driving up car prices at a time when demand remained high. Additionally, the market now features 32 models with price tags exceeding $100,000, a substantial increase from just 12 such models in 2018. Even the majority of used cars now command prices higher than a brand-new Mirage, with an average sale price of $29,000.

Individuals like Andrew Lang from Flint, Michigan, find themselves priced out of the market altogether. Lang, a 26-year-old, expressed his inability to afford any new car, not even a Mirage, due to financial constraints. This sentiment resonates with many, underscoring the challenges faced by budget-conscious consumers.

Richard Herod III, the managing partner at White Bear Mitsubishi near St. Paul, Minnesota, revealed that used cars pose the primary competition to the Mirage at his dealership. Nevertheless, the shortage of new small cars in recent years has led to limited choices and higher prices for used vehicles.

The Mirage’s affordability partially stems from its lower production costs and fuel efficiency. Despite its 3-cylinder engine offering a modest 76 horsepower, it stands as a cost-effective option for those seeking an economical and fuel-savvy ride.

Mitsubishi faces challenges in effectively marketing the Mirage, hindered by a small dealer network and less prominent advertising. Additionally, the brand’s customer base generally holds below-average credit scores, and rising loan rates have rendered monthly payments unfeasible for many, exacerbating the affordability issue.

While Mitsubishi’s decision to discontinue the Mirage might seem rash, recent data indicates a resurgence in small car sales, up 11.7% in the first half of the year after years of decline. Some of this growth can be attributed to rising fuel prices, sparking interest from buyers, despite fleet sales to rental car companies also playing a significant role.

Mitsubishi’s ability to offer the Mirage at a lower price than the competition can be attributed to factors including the model’s maturity and the use of low-cost labor in its production.

As the Mirage likely nears the end of its run, several other cars and SUVs hover just above the $20,000 mark in terms of average sales prices. Notable examples include the Kia Rio, Nissan Versa, Hyundai Venue, and Nissan Sentra.

Faced with the vanishing sub-$20,000 new car option, Michelle Krebs, an analyst at Cox Automotive, suggests considering certified pre-owned small cars, which come with affordable prices and at least a year’s warranty.

Krebs predicts a minor decrease in new car prices as factories ramp up production, potentially leading to automakers offering discounts. Electric vehicles, particularly led by Tesla, have already experienced price declines, further contributing to the overall reduction in car costs.

However, the era of the $20,000 new car is unlikely to return unless a new entrant, perhaps a Chinese automaker, disrupts the market dynamics. The factors influencing car pricing and consumer preferences have evolved, reshaping the landscape of affordable options.

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