Here’s how much the gap between US income and car prices has grown in 55 years

The average price of a new car in 1970 was $3,543. Don’t get too excited. Thanks to inflation, this actually means $31,411.13 (those 13 cents are pretty significant). But compare that to 2025, when the average price surpassed $50,000 for the first time. Or last week when it rose to $51,974 – yet the market is still quite strong – and you see the real difference in how far your money is not moving. Because that 1970 number, compared to inflation-adjusted dollars, is a whopping 65.5% increase in the price of a new car.

Just for fun – and we use the word entertainment sadistically – if you also track the average household income and the average price of a new car over the last 55 years, you get some interesting statistics that you can’t entirely blame, for example, on awareness – although you could probably blame it on trucks.

One way to gauge your ability to afford a new car is to simply look at what percentage of your annual income it took to buy a new car 50 years ago. In 1975, according to the U.S. Census Bureau, the average family brought in $11,800. Adjusted for inflation, that’s approximately $75,901.18.

But keeping apples to apples, the average price of a new car in 1975 was $4,961. That’s 42% of that $11,800 annual income. But the average new car sticker today of $51,974 takes 62% of the annual household salary to buy that new vehicle. To be fair, we’re using the Census Bureau’s latest, 2024 median household number of $83,730, but even though it’s slightly higher in 2026, there’s no way it’s making up a 20% difference. Still, the car’s price increase hasn’t been linear, as the real numbers show a more complicated rearview mirror perspective.

Inflation fell from 9.1% in 1975 to 3.6% in 1985. It was a big difference to be felt. And yet new car prices doubled to $11,835. Meanwhile, the income also reached $23,620. However, now it took 50% That mid-Reagan-era annual income could pay for a sweet, sweet Chrysler LeBaron. Being cash-rich in the mid-1980s didn’t change the fact that the ultra-luxurious 1970s Subaru Brat, with its al fresco rear-facing seats, was affordable as a percentage of income.

But the real cost for car prices before and after Y2K wasn’t inflation or fake wood trim. This was the rise of trucks and SUVs that came to dominate the overall mix of what we drive. In 1995, 60% of all vehicles were cars or wagons, according to EPA data. By 2020, this ratio had completely reversed, with only 31% of vehicles classified as sedans or wagons.

What else changed: The price of trucks and SUVs versus cars. The average price of a new car in 1995 was $17,892, and the average price of a new truck-slash-SUV was $17,725. Income was $34,080, so it took about 52% of your annual cash to afford that new whip. In 2010, sedans and wagons made up almost half (55%) of the truck versus car mix. But in the meantime, you’re paying far more for the privilege of driving a truck or SUV. Buying a median priced car is still about 50.5% of the annual median household income ($49,280), which is now $24,907. In the same year, the average SUV or truck costs $32,324, which eats up 65.6% of your annual income.

There’s probably this unrealistic formula for buying a new car called the 20/4/10 rule. It suggests paying 20% ​​down payment for a new car, taking a loan of no more than four years to pay off the balance, and still somehow not taking more than 10% of your monthly income in transportation costs. The last includes insurance, maintenance, gas, etc. as well as hefty car payments. Correct.

Part of the formula that’s destroying the cost of a new car is any notion of taking out a short-term loan. according to edmondsLast spring, 36.5% of new vehicle buyers took out a loan for 73 months or longer, and a record 23.9% of buyers signed up for a seven-year loan.

Meanwhile, if you take the 20% down payment tip for the average $51,974 sticker, that’s $10,394. However, going back to car-vs.-truck criteria can save you money. In 2025, compact cars like the Toyota Corolla and Honda Civic are projected to have a 6.5% U.S. market share, and as of May, the average $27,590 compact car transaction price was just 1% higher than last year. Plus, dropping 20% ​​on that compact costs a relatively high $5,518.

Remember how we said it would take 42% of your annual income to cover the $4,961 car sticker? Today, by that same metric, we’re talking 33% of an American’s average annual income to afford that Civic or Corolla. No question: trucks and SUVs are very expensive, so consider not buying them. Go back to the good old days and buy a Honda or Toyota sedan or hatchback, which is what Americans started doing in the 1970s.