Here's How Much The Gap Between U.S. Income And Car Prices Has Increased In 55 Years

The average price of a new car in 1970 was $3,543. Don't get super excited. Thanks to inflation, that really means $31,411.13 (those 13 cents are very important). But compare that to 2025, when the average price passed $50,000 for the first time. Or last week when it ballooned to $51,974 — yet the market is still pretty robust – and you see a real difference in how far your money isn't stretching. Because that 1970 number, compared in inflation-adjusted dollars, is a massive 65.5% increase in the price of a new car.

Just for fun – and we use the term fun in a sadist way — if you track the median household income over the past 55 years, and the average new-car price, too, you get some interesting stats that you cannot blame solely on, say, wokeness — though you can possibly blame it on trucks.

One way to figure the atrophy of your new-car buying muscle is just to look at the percentage of annual income it took to buy a new car 50 years ago. In 1975, according to the U.S. Census Bureau, the median household brought in $11,800. Adjusted for inflation, that's around $75,901.18. 

But keeping it apples to apples, the average new-car price was $4,961 in 1975. That's 42% of that $11,800 annual income. But today's average new car sticker of $51,974 takes 62% of an 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 if it's a little higher in 2026, no way it's making up that 20% difference. Still, car price growth hasn't been linear, as the actual numbers show a more complicated rearview mirror perspective. 

Inflation fell from 9.1% in 1975 to 3.6% in 1985. That had to feel like a huge difference. And yet new car prices doubled, climbing to $11,835. Meanwhile, income did, too, shooting up to $23,620. However, it now took 50% of that mid-Reagan-era annual income to pay for a sweet, sweet Chrysler LeBaron. Being flush with cash in the mid-1980s didn't change the fact that a 1970s insanely cool Subaru Brat, with its al fresco rear-facing seats, was, as a percentage of income, cheaper. 

But the real pre- and post-Y2K cost driver for car prices wasn't inflation or faux wood trim. It was the rise of trucks and SUVs coming 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, that ratio had entirely flipped, with only 31% of vehicles classified as sedans or wagons. 

Also what changed: The price of trucks and SUVs versus cars. In 1995 the average price of a new car was $17,892, and 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 fell to just about half (55%) of the truck versus car mix. But during this time, you're paying way more for the privilege of driving a truck or SUV. It's still about 50.5% of an annual median household income ($49,280) to afford the average-priced car, which now sits at $24,907. That same year, the average SUV or truck is priced at $32,324, eating 65.6% of your annual income. 

There's this perhaps unrealistic formula called the 20/4/10 rule for buying a new car. It suggests a 20% down payment for a new car, taking out no more than a four-year loan to pay for the balance, and yet somehow not exceeding 10% of your monthly income in transportation costs. The last includes insurance, maintenance, gas, and so on, as well as that beefy car payment. Right. 

One part of that formula that the cost of a new car is destroying is any notion of taking out a short-term loan. According to Edmunds, 36.5% of new-vehicle buyers this past spring took out a loan of 73 months or longer, and a record 23.9% of buyers are onboard for seven-year loans.

Meanwhile, if you take the 20% advice for a down payment on the average, $51,974 sticker, that's $10,394. Going back to the car-versus-truck yardstick, however, could save you money. In 2025, compact cars like the Toyota Corolla and Honda Civic accounted for 6.5% of the U.S. market, and as of May, the average $27,590 compact  car transaction price was up just 1% versus last year. Plus, putting down 20% on that compact costs a saner $5,518.

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