Remember when a brand-new small car for under $20,000 (or a similar UK price point) felt realistic, not nostalgic? Today, that kind of deal has almost disappeared from showrooms.

If a first car, city runabout or basic family hatchback is on the shopping list, the question is unavoidable: what *happened* to affordable new cars?

Vanishing Deals

Through the 2000s and 2010s, small models like the Chevrolet Spark, Hyundai Accent, Ford Fiesta, Toyota Yaris and Mitsubishi Mirage quietly kept the new-car market accessible. They were simple, efficient and relatively cheap to buy and run.

Fast forward to 2025, and that landscape has almost completely changed. In the U.S. market, the Nissan Versa is effectively the last new car still starting below the $20,000 mark, and even it sits right on the threshold in its most basic form. For many shoppers, the affordable end of the new-car market has simply shrunk to a single option.

Rising Costs

Building any new vehicle has become more expensive. Industry analysts point to higher labour costs, persistent supply-chain issues and pricier raw materials such as steel, aluminium and battery metals. The chip shortages of recent years forced manufacturers to prioritise more profitable vehicles, and the ripple effects are still visible.

Instead of absorbing these increases, brands have had to move list prices upwards. Small cars, already built on thin margins, have become particularly difficult to justify. For some manufacturers, discontinuing their cheapest models has been more attractive than trying to keep them genuinely low-cost.

Safety Rules

Modern safety and emissions standards have also transformed what even a “basic” new car includes. Reversing cameras, tyre-pressure monitoring, multiple airbags and stability control are now standard equipment in many markets. Increasingly, driver-assist systems such as automatic emergency braking and pedestrian detection are being added across line-ups.

Safety experts welcome these upgrades, and the benefits are real. However, every additional sensor, control unit and calibration step adds cost and complexity. When the same rulebook applies to a premium SUV and an entry-level hatchback, the small car has far less room to remain truly budget-friendly.

Profit Priorities

Automakers are businesses, and executives openly favour vehicles that deliver stronger profit per unit. Well-equipped crossovers, larger SUVs and pickups typically earn far more per sale than minimalist entry-level cars. Selling one high-margin vehicle can be more profitable than selling several stripped-back small cars.

This shift is visible in factory plans. A high-profile joint plant in Alabama, for example, was initially announced for building a popular compact car. Plans later changed to produce crossovers instead, reflecting the stronger demand — and margins — in that segment. When multiple brands adopt the same strategy, the entire market tilts away from low-priced models.

Price Creep

Inflation has quietly reshaped what “affordable” means. Around the year 2000, a mid-size sedan such as a Honda Accord or Toyota Camry started in the mid-teens thousands of dollars in the United States. Adjusted for today’s money, those prices line up closely with the current starting figures for their modern equivalents.

At the same time, the overall market has moved up. Recent data shows average new-vehicle transaction prices hovering close to $49,000, and the share of new cars priced under $30,000 has dropped sharply since the late 2010s. Budget-friendly slices of the market have thinned, while the £/$50,000-plus category has steadily grown its share.

Used Car Shift

With fewer truly cheap new cars available, more buyers are turning to used vehicles. However, stronger demand and limited supply — especially for well-kept, relatively recent models — have kept used prices higher than many shoppers expect.

Average advertised used-car prices remain close to the high-twenties in dollars, and desirable five- to seven-year-old models such as compact sedans from major Japanese brands often sit in the mid-teens to just under $20,000. For someone on a tight budget, that can mean choosing between a basic new car with modern safety features or an older, more comfortable used model with higher mileage.

Interestingly, finance specialists note that not all used-car buyers are forced there by hardship. Some higher-credit customers who could afford new are consciously choosing nearly new or late-model used vehicles as better value, especially as new-car prices climb.

Loan Pressures

As prices have risen, many buyers have stretched their loan terms. Recent finance data shows average new-car loans running close to 68 months, with used-car loans not far behind. Terms of 72 or even 84 months are no longer unusual.

Longer loans lower the monthly payment but increase the total interest paid. The effect is especially harsh for borrowers with weaker credit profiles, who often face double-digit interest rates. On a $30,000 vehicle financed for 84 months at around 13%, the interest alone can approach $16,000 — more than half the original price again.

That combination of long terms and high rates also raises the risk of negative equity, where the car’s market value drops faster than the loan balance. If the vehicle has to be sold or traded early, the owner may still owe thousands more than the car is worth.

Future Budget Cars

Electric vehicles are frequently promoted as the future of motoring, but entry-level EV prices remain closer to the $30,000 mark in many markets. Battery costs have fallen, yet not enough to produce a wave of genuinely low-priced new EVs. Charging infrastructure is also uneven, which limits how attractive cheaper EVs can be for some drivers.

Ultra-affordable small electric cars do exist in other regions, but import rules, crash-safety standards and equipment expectations make it difficult to bring those models into markets with stricter regulations. At the same time, manufacturers are putting much of their investment into electrification, driver-assist technology and profitable larger vehicles, not into a revival of the classic budget car.

Last Survivors

That leaves a handful of models, like the 2025 Nissan Versa in its most basic form, carrying the torch for the sub-$20,000 new car. It offers essential transport, a modern safety suite and the reassurance of a full warranty at a price point very few others match.

Whether such cars can survive long term is uncertain. If production costs continue to rise or demand for small sedans fades further, even these last affordable options may either disappear or return in more expensive, better-equipped trims. With trucks and SUVs already averaging thousands more than cars, the overall market is clearly moving upward in price.

Conclusion

The near-disappearance of the $20,000 new car is not caused by lack of interest, but by a mix of higher production costs, stricter safety requirements, a shift toward high-margin vehicles, elevated used-car prices and longer, more expensive loans. For many buyers, “affordable” now means choosing carefully between a basic new car, a well-used one, or stretching a budget further than feels comfortable.

Looking at your own situation, would you rather own a simple brand-new budget car, a better-equipped used vehicle, or delay buying altogether until the market changes — and why?