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Juan David Ramirez knows that his 2012 Nissan Juke SL is on its last legs. But buying a new car in the Orlando area these days reminds him of car buying in his home country in Colombia, where only the wealthy can afford new cars.

Ramirez, 33, and his wife Angelica Castro-Calle really want a new, small SUV with a little space for camping and paddleboarding gear. But despite good jobs in finance and business contracting, the couple’s monthly loan payment would run around $700 for the $35,000 models they are looking at, before dealer markups.

So they plan to patch up the Nissan, which is paid off. He blames the manufacturers and dealers for charging so much for new cars.

“They’re going to price out a certain segment of the market and of the demographic,” Ramirez said. “But that’s something they’re probably okay with.”

Even as inflation is easing and global chip supply shortages are beginning to resolve, more Americans are being priced out of the nation’s new car market, industry and government data suggests. Spending on new cars by the lowest 20 percent of earners dropped to its lowest level in 11 years. Meanwhile, spending on new cars by the top 20 percent reached its highest level on record, going back to 1984, according to the most recent data from the 2021 Consumer Expenditure Survey, not adjusted for inflation.

“New vehicles were maybe never an everyman product in America,” Charles Chesbrough, senior economist at Cox Automotive, said at an automotive conference earlier this year. “We like to believe that they were, but they probably haven’t been for a long time. But certainly they are even less so today.”

The problems pushing new cars out of reach are twofold. On the demand side, rising interest rates have made car loans far more costly — the average monthly payment reached $686 in mid-2022, according to data from Edmunds. Last month, it hit $730.

But even if shoppers can snag a decent interest rate, the supply of cars available for purchase has been trending far more expensive, in part because manufacturers have been funneling resources into souped-up versions of pricey models and cutting back on cheaper options.

In late April, General Motors announced it would scrap production of its top-selling electric vehicle, <a href="https://www.washingtonpost.com/technology/2023/04/25/chevy-bolt-ev-end-production/" target=_blank>the Chevy Bolt, wiping out one of the most affordable EVs in the United States by the end of the year.</a> That continues a longtime trend. In 2017, for example, there were 11 models available on the U.S. market for less than $20,000, according to Cox data. By the end of 2022, there were four. Then, by March 2023, only 2.

The end result is a widening gap between those who can afford new cars and those who can’t. The average price of a new car in the United States <a href="https://www.kbb.com/car-advice/when-will-car-prices-drop/" target=_blank>hit $48,008</a> in March, up 30 percent from March 2020, according to Kelley Blue Book.

Automakers are selling fewer new vehicles in the United States than they did before the pandemic — about <a href="https://www.prnewswire.com/news-releases/cox-automotive-forecast-us-auto-sales-expected-to-finish-2022-down-8-year-over-year-as-general-motors-reclaims-top-spot-honda-and-nissan-fall-significantly-301710479.html" target=_blank>13.9 million</a> last year, versus 17 million in 2019. But their 2022 revenue were still $15 billion higher than in 2019, because the mix they are selling is more expensive, according to Cox Automotive.

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A big reason auto manufacturers have leaned heavily into pricier vehicles is the global chip shortage. The dearth of the tiny electronic components, caused by pandemic-related gyrations in supply and demand, forced automakers to slash output, sending prices for new and used vehicles up. The scarcity forced carmakers to ration their components, which they did by reserving them for their most profitable, high-end vehicles.

Automakers have also faced steeper production costs, thanks to factory closures in China during the pandemic and ongoing labor shortages. Some of those troubles are easing. But manufacturers have started holding more parts in inventory to guard against future shortages, a strategy that raises their costs, said Ambrose Conroy, an automotive expert at the consultancy Seraph.

Meanwhile, the auto industry is investing big money to overhaul factories to produce electric vehicles, a major expense that also contributes to rising prices, Conroy added.

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Those changes accelerated a years-long trend that was already squeezing affordable cars out of the U.S. market, as automakers shifted to producing more high-margin SUVs and trucks. For more than a decade, automakers cranked up U.S. advertising for pickup trucks and SUVs, which were more profitable to sell in the United States because a 25 percent import tariff protected many of them from foreign competition.

“Everybody seems to have been conditioned to drive an SUV these days,” Conroy said.

Among the cars discontinued last year was the Chevy Spark, the cheapest of which started at $13,600. Chevy sold more than 24,400 of those cars in 2021 — more than most luxury models can claim.

Now, Chevy’s cheapest models cost more than $20,000.

At the same time, the number of models selling for more than $60,000 keeps jumping: 61 in 2017, then 76 in 2021, then 90 in 2022. By March, the category grew to 94 models.

In Austin, Johnny Loredo and his wife paid $38,000 for a new Nissan Frontier truck two years ago. “I was in sticker shock … and it was a base model,” he said. If they hadn’t had a used Suburban to trade in, they wouldn’t have been able to afford it, he said.

“I think they have outpaced what people get paid,” said Loredo, a hotel manager. “When we’re doing raises here, we’re giving the basic two-, three-, four-percent increase, but that cannot maintain a new car. That’s why you’re seeing a lot of used cars and people are just fixing their cars.”

Manufacturers determine which cars get sent to dealerships, and typically won’t send new inventory until the current stock gets sold. In Maryland, where Andrea White has expensive cars sitting on her lot, she said she’s “just suffering through it.”

“We have some final edition Dodge Challengers for $80 or $90K,” White said. “We don’t even want another one.”

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Dealers say manufacturers are lifting prices beyond what customers will go for, in some cases leaving dealers stuck with models they can’t sell. Earlier this spring, White had 76 new vehicles on the lot of her Annapolis, Md., car dealership. At the time, she had no takers on the $88,000 Jeep Wagoneer. The $115,000 Grand Wagoneer? Not budging. Many of her cars cost between $50,000 and $60,000.

“I’ve got a few that are so expensive, I would do anything to get them off the lot,” White said. “I’m just giving people prices so that we would just break even. That’s how desperate I am to dump this expensive stuff, because it’s hurting us.”

The mismatch also stems from automakers’ response to how consumers behaved at the height of the pandemic, when many Americans had more cash to spend on goods and were ordering new vehicles with lots of extra features.

“These big Suburbans and Yukons and Expeditions, they were loaded up. So when you look at some of these numbers, some of this was self-inflicted by the consumer,” Pete DeLongchamps, senior vice president at Group 1 Automotive, which owns 150 auto dealerships in the United States, told a recent automotive conference. “But I think now as the rates have gone up and we’re seeing some of these monthly price points, there is some moderation going on.”

Auto manufacturing officials disagree that they are producing cars that are out of reach, adding that the models for sale reflect customer interests and demand for SUVs and trucks. In a statement, John Bozzella, president and chief executive of the Alliance for Automotive Innovation, said that “the beauty of the auto industry — and this has always been true — is that there’s literally something for everybody.”

“More than 400 models across different manufacturers, configurations, price points and now a choice of powertrains — conventional or electric,” he said. “Why are there so many pickup and utility vehicle models for sale? Because customers really like this category of vehicles.”

Straining shoppers’ budgets even more are rising monthly payments. That’s in large part because the Federal Reserve has been hiking interest rates for more than a year, moving at the fastest pace in decades to rein in <a href="https://www.washingtonpost.com/business/2023/04/12/cpi-march-fed-prices/" target=_blank>inflation</a>. This week, the central bank raised interest rates for the <a href="https://www.washingtonpost.com/business/2023/05/03/fed-rate-hike/" target=_blank>10th time,</a> bringing the Fed’s benchmark interest rate to between 5 and 5.25 percent. It’s unclear if they will hike it again.

Interest rate hikes <a href="https://www.washingtonpost.com/business/interactive/2022/fed-rate-hikes-economy/" target=_blank>ricochet through all kinds of lending </a>to curb consumer demand. The goal is to get borrowing costs high enough that people shy away from buying cars, for example, until supply can catch up with demand.

But the side effect is a widening in the affordability gap. For years leading up to the pandemic, the average monthly payment for a new car hovered between $500 and $600. That quickly changed as the Fed started hiking rates in March 2022.

“When you do the math on what that means to a median household, it is basically pricing the median completely out of the new vehicle market, and leaving higher-income households that disproportionately have more wealth, better credit, and as a result, can afford even more expensive vehicles, so the migration even accelerates in those price points,” said Jonathan Smoke, chief economist at Cox Automotive.

Car payments are $1,000 for a lot of consumers. Here’s why.

That has economists and auto experts keeping a close watch on car repossession rates, which are approaching pre-pandemic levels. During the covid crisis, lenders became more lenient with late payments and stimulus checks helped people keep up. There seem to be few risks, so far, of a wave of car repossessions. But buffers are drying up, especially for lower-credit consumers who make up the subprime loan market. Their repossession rates now are higher than 2019, according to Kelley Blue Book.

Some dealers say they’re starting to see an uptick in delinquent loan payments, particularly among buyers with weak credit. “Especially at that lower FICO score we’re seeing a big spike in delinquencies today, all due to affordability,” DeLongchamps, the auto dealer, said.

He added that as customers try to lower their monthly payments, loan terms are getting longer — in some cases 72 or 73 months.

Andrew Van Dam contributed to this report.

Yale University, BA in History

Rachel Siegel is an economics reporter covering the Federal Reserve. She previously covered breaking news for the Post's financial section and local politics for the Post's Metro desk. Before joining the Post in June 2017, Rachel contributed to The Marshall Project and The Dallas Morning News.

Rachel Siegel

Finalist for a 2016 Pulitzer Prize as part of a WSJ team

National Institute for Health Care Management print award, 2017

Association of Health Care Journalists first-place award, 2015

Newswomen's Club of New York award, 2017

Cornell University, BA in English

Jeanne Whalen is a reporter covering business around the world. She previously reported for the Wall Street Journal from New York, London and Moscow. 