Why cheap cars are disappearing from dealer showrooms

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 sub-compact 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 Those have been replaced by subcompact and compact sport utility vehicles, which tend to have slightly higher sticker prices starting at or just above $20,000.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.

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