President Trump has frequently dismissed the very idea of an affordability crisis as a political hoax, suggesting the government bears no responsibility for any financial squeeze felt at the kitchen table. But that’s not how tens of millions of Americans see it. And while the sources of their frustrations are many and varied, it’s clear the chickens are coming home to roost – that is, there has been a substantial decline, especially in the past few decades, in the public’s trust of government institutions to improve their lives.

Why is an economy that pumps out more than $85,000 in goods and services per person each year leaving so many dissatisfied? Part of the answer must lie in a phenomenon called premiumization. Across our essential infrastructures, we are seeing a retreat from universal access in favor of high-margin surpluses for the affluent. We see it in the skies, where airlines have squeezed the coach cabin to prioritize business and first-class seating. And we see it on the ground, where in the past half century automobile ownership has morphed from an almost universal symbol of freedom into a budget-buster for the lower 40 percent of households.

CARS “R” US
The U.S. transportation system has led to most Americans’ lives being organized around their private vehicles. In our collective imagination, the car is Steve McQueen’s Mustang tearing through the hills of San Francisco or the Beach Boys’ “Little Deuce Coupe” brimming with youthful confidence. The way that dependence has played out, however, is sobering. Roughly 85 percent of Americans endure stressful work commutes, often alone, in their cars. And 90 percent are tethered to a steering wheel for essential nonwork trips, such as grocery runs, school pickups or dentist visits. But rising costs of car ownership over the decades have stressed the finances of all but the most affluent among us.

True luxury cars were always beyond the reach of the masses. What’s changed is that cheap budget vehicles have been driven to the brink of extinction. From the 1980s through the late 2000s, the budget list includes “econoboxes” like the Toyota Tercel, Geo Metro and Dodge Neon. At a sticker price of $18,000 to $22,000 in today’s dollars, they offered low-cost lifelines for commuters. Yet automakers have largely abandoned them because profit margins on small cars were razor-thin and high tariffs have prevented foreign competitors from offering them. Given this protection and the increasing wealth of the top 40 percent of households, automakers have pursued the fat margins of mid-size SUVs and pickup trucks, and prioritized those with the highest margins like the Ford F-Series and Jeep Wagoneer. Those behemoths now command hefty average transaction prices north of $60,000.

Smaller vehicles have been systematically phased out, and with the recent discontinuation of the Nissan Versa and Mitsubishi Mirage, the sub-$20,000 new car has officially vanished from the American market. Even the practical family choices have migrated into luxury-adjacent price brackets: the Toyota RAV4 and Honda CR-V, once the standard for middle-class value, now command average prices near $37,000. Indeed, the shifting composition of the U.S. automobile market pushed the average transaction price for a new vehicle to a record $50,000 in 2025.

To put things in perspective, the $50,000 average transaction price for a new vehicle is nearly a 7.5 percent increase in real terms from 2015, when a new car averaged approximately $46,500 in today’s dollars. Even the used car market, the traditional escape hatch for the middle class, is evaporating as a source of economy vehicles, with average used car prices hovering near $27,000 – a price point that a decade ago would have bought a new sedan with all the bells and whistles. This price creep has fundamentally decoupled car ownership from the average American’s earnings.

Many households must make do by financing their purchases with six- and seven-year instead of three- and four-year auto loans. The catch? The intersection of soaring vehicle prices and extended loan terms has heightened the risk of repossession for American households – an extreme outcome of the modern automobile affordability crisis. Repossessions doubled between 2020 and 2025; they are projected to surpass 3 million by the end of 2026, echoing the peak of the Great Recession.

The human toll of this pricing surge is reflected in a fleet of zombie cars – vehicles kept on the road long past their safe reliability because their owners are priced out of the replacement market. In early 2026, the average age of a passenger car in the U.S. hit a record 14.1 years, a sharp climb from the nine-year average seen at the turn of the millennium.

For middle-income households, this aging fleet isn’t a choice, it’s a trap. It creates a massive, hidden welfare loss: by pricing people out of the new market, we are stalling the diffusion of safety and emissions technology and keeping high-emission, less-safe clunkers on the road, negating the very environmental and safety goals the government should support.

To add to the problem, auto repair costs jumped 15 percent in the last year alone, driven by the complexity of modern drive trains, labor shortages and reduced access to foreign-made replacement parts. An average trip to the mechanic now costs over $840. That’s an amount that 40 percent of Americans cannot cover without going into debt, causing owners of clunkers everywhere to pray the “check engine” light doesn’t start flashing.

The dearth of affordable, reliable transportation is fracturing the American family’s daily rhythm. For one thing, many households are forced to share a single vehicle among multiple working adults. This creates a mobility ceiling: when a car breaks down or is needed by a spouse for the late-night shift, the other family members miss work, kids miss school and medical appointments are skipped. In cardependent America, an unaffordable car isn’t just a financial burden, it is a barrier to basic participation in the economy.

NO EXIT
Urban planners have long advocated public transit as an alternative – it’s an important option in Europe and Asia, why not here? The short answer is that it is an attractive, albeit highly subsidized, option for only a small minority of travelers. Car dependence is effectively a fait accompli because U.S. cities lack adequate density to support efficient and extensive route systems that could appeal to commuters and, in any case, cities’ current finances have made it much more difficult for them to bear the increasing cost of building and subsidizing mass transit. That’s why any sensible urban transportation policy focuses on congestion pricing to make the most efficient use of the nation’s existing road capacity.

In any event, there are good reasons to make the most of the reality that, for the foreseeable future, we will live in a non-autonomous, car-dependent economy and culture. Autonomous vehicles will be a game changer, but one that is decades away. Of course, people still derive immense value from the mobility and privacy that private transportation brings. Importantly, car use can expand a worker’s relevant labor market by an order of magnitude, improving job matching and quality and driving up both productivity and lifetime earnings. By the same token, the automobile can serve as a critical bridge to the essential infrastructure of a healthy life, easing access to better sources of fresh food, better education and better health care.

All of this suggests to me that the escalating cost of car ownership, which threatens access to the large benefits from car use, adds more stress on family budgets than its weight on cost-of-living indexes would suggest. But what could – and should – be done about it?

DC KNOWS BEST?
First, it’s important to acknowledge that the escalation in car prices is not a natural market outcome like, say, the falling cost of consumer electronics or the rising cost of coffee. Government policies have inflated prices primarily by shielding automakers from competition from foreign automakers.

The initial problematic intervention of the post-war era in the automobile market, a 25 percent tariff on light trucks and cargo vans, was oddly dubbed the Chicken Tax. Imposed in 1964 by President Lyndon Johnson as retaliation against European duties on American poultry, it long outlasted the chicken brouhaha. Indeed, it morphed into a permanent protectionist shield designed to safeguard domestic automakers’ profits and United Auto Workers’ jobs from a rising tide of imports.

The intent was straightforward: by blocking Americans from accessing low-cost workhorses available from Japan (as well as Europe), such as the Toyota Hilux, the federal government gave American automakers a virtual lock on the light truck market. Hardly anybody remembers why light trucks were singled out in 1964. But the zombie truck tariff marches on, raising prices to consumers while Detroit benefits. When the Chicken Tax was introduced, the market share of light trucks was below 20 percent. Today, light trucks, including pickups, SUVs and vans, dominate the American market, where they are more likely to be found in a suburban valet line than on a muddy road.

By the time the 1980s rolled around, Detroit faced the triple whammy of high gas prices, a demand-killing recession and a murderers’ row of Asian competitors making small, fuel-efficient cars that the Big Three couldn’t match. Again, Detroit turned to Washington for succor, this time in the form of the 1981 Voluntary Export Restraints forced on Japan by the Reagan administration. Tokyo agreed to cap exports at 1.68 million vehicles per year, effectively creating a shortage of lower-cost, fuel-efficient econoboxes.

Everybody benefited from the Washingtonmanaged cartel arrangement: Detroit got both breathing room to design competitive vehicles and to increase sales in the small car market (with distinctly inferior products) in the meantime, while Japanese automakers got to raise prices. Did I say everybody? Amend that to everybody but consumers, who paid too much and/or got too little for their money.

The VERs ended in 1994, but the legacy of market distortions lives on. Japanese carmakers gradually shifted their focus to more expensive, higher-end products and never looked back, ensuring that every limited slot in their shipment was occupied by a highmargin model. This pivot led to new brands like Lexus (Toyota), Acura (Honda) and Infiniti (Nissan) being launched in the late 1980s. Meanwhile, Detroit utilized its breathing room not to build better cars and regain market share but to raise prices – while government insulated the industry from disaster at the direct expense of the American middle class.

To make matters worse, Detroit’s insulation from competition bred a lack of quality. Protected from the pressures of the open market, U.S. automakers allowed the reliability of their fleets to fall noticeably behind their Japanese rivals. The tide only began to turn for consumers when Japanese manufacturers, seeking to bypass the VERs, began building “transplant factories” in the American South and Midwest. Those domesticbuilt imports gave consumers an escape hatch from subpar American engineering. Even Lee Iacocca, the legendary chairman of Chrysler, later admitted the industry’s failure with blunt candor: Maybe we sold consumers “some crap,” he reflected, noting that customers were now rightfully replacing those inferior vehicles with better-built Japanese cars. In 1989, the Toyota Camry and the Honda Accord became the bestselling cars in the United States.

Over the next decade, trade protection evolved into a durable bipartisan consensus. Even during the open trade era of NAFTA – initially proposed by Ronald Reagan, negotiated by George H. W. Bush, and pushed through by Bill Clinton – the U.S. maintained a 2.5 percent tariff on all imported passenger cars from outside North America. The barrier wasn’t high compared to the impact of the VERs, but its durability in the face of the winds of globalization was a clear signal that regardless of the party in power, Washington would never let the American auto market be fully exposed to competition from Europe or Asia.

While trade policies were inflating vehicle prices at the border, domestic regulatory shifts were adding to the pain. Corporate Average Fuel Economy (known as CAFE) standards, introduced in the 1970s, were amended in the 1990s to include a light truck loophole that applied much more lenient fuel efficiency mandates to trucks and SUVs than to passenger cars.

This carve-out was originally intended to spare farmers, small business owners and tradespeople who required trucks with larger engines. However, by classifying SUVs as light trucks for purposes of fuel efficiency (but not for tariffs!) even when they were used primarily as family transport, Washington gave Detroit yet another reason to shift production away from fuel-efficient sedans and toward high-margin “work” vehicles gussied up to carry Cinderella and her prince to balls. This regulatory shield helped to protect Detroit’s most profitable segment from nimble foreign competition, incentivizing automakers to pour their R&D into massive Chevy Suburbans and Ford Expeditions rather than the budget-friendly econoboxes that were once the hallmark of middle-class mobility.

For the next two decades, the Bush and Obama administrations largely maintained the status quo for the auto industry. However, trade tensions fed by the rise of the Great Chinese Export Machine finally snapped during President Donald Trump’s first term, when his administration utilized Section 232 of the Trade Expansion Act to declare that foreign-made cars and parts were a threat to national security.

The feather-light rationale was that a shrinking domestic auto industry would eventually lack the research, development and manufacturing capacity necessary to support military requirements during a conflict. Trump subsequently imposed a 25 percent tariff on $250 billion worth of Chinese goods, including auto components and electric vehicles, effectively starting a trade war.

Rather than reversing those policies, President Joe Biden doubled down on them. His administration not only maintained the Trump-era tariffs but expanded them. He walled off the U.S. market from low-cost competition, most notably by imposing a 100 percent tariff on Chinese electric vehicles. While these measures were designed to protect American jobs and foster a domestic EV supply chain, they have also functioned as a price floor – keeping the affordable $15,000 Chinese EVs that are currently gliding silently through the streets of Paris and Shanghai from ever reaching American showrooms.

Finally, in his second term, President Trump implemented a sweeping 25 percent tariff on imported automobiles and parts – a policy that has added an estimated $6,000 to the sticker price of even the most affordable vehicle segments. Trump again invoked Section 232 of the Trade Expansion Act, arguing that a stagnant domestic production base and a large trade deficit in auto parts somehow threatened the U.S. defense industrial base. Trump also maintained the 100 percent tariff on Chinese electric vehicles.

In sum, the policy initiated by the 1964 Chicken Tax on light trucks has evolved into a broader pattern of protectionist measures for the U.S. auto industry. Each administration has offered its own rationale, but all rest on the misguided belief that legacy manufacturing must be shielded from competition at any cost.

By the time the pandemic hit, the auto industry had already spent a decade preparing to kill the econobox and cut the bottom out of the market. By 2025, households earning over $150,000 accounted for 43 percent of all new car purchases, up from 33 percent in 2019. Meanwhile, the share of new cars bought by those earning under $75,000 dropped from 37 percent to just 26 percent.

Aided by protectionism, automakers essentially performed an act of demographic triage. They realized that a single $80,000 Ford Expedition generated significantly more profit than four $20,000 Fiestas. They didn’t need the average American to buy a car anymore; they only needed affluent households to buy a second full-sized SUV.

UNTANGLING
The path to dismantling this slow-motion crisis in affordable transportation is clear, albeit unlikely to be taken by those who today have the power to take it. First, Washington must stop using trade policy to transfer wealth from drivers to manufacturers. Eliminating tariffs on light trucks and automobiles and – most importantly – lifting the embargo on China’s affordable EVs would invite the competition necessary to significantly lower prices. One need only look to Canada’s recent pivot away from EV protectionism by slashing its prohibitive tariffs on Chinese EVs to a mere 6.1 percent to see how quickly inefficient trade policy can be dismantled to the consumer’s benefit. Canada will welcome models like the BYD Dolphin and the Wuling Mini, which may retail for under $20,000.

The argument against opening trade in Chinese vehicles has no more substance than the argument for barring TVs or furniture made in China. Chinese EVs, from brands like BYD, Xiaomi and Zeekr, are highly refined machines that often exceed the digital integration and battery efficiency of American rivals. In many global markets, it is the Chinese manufacturers who are setting the benchmark for cabin quality and safety, leaving Western legacy brands scrambling to catch up.

Concerns about Chinese government subsidies and U.S. job displacement are valid, but they ignore the potential for a new era of transplant manufacturing, especially as the Detroit Three take multibillion-dollar writedowns and retreat from their EV goals and, as in the case of the Chevrolet Trax, transplant in reverse by using high-quality low-cost foreign manufacturing to subsidize their American brand identity. A realistic compromise would be to allow Chinese automakers to sell their EVs in the United States, provided they are manufactured in the U.S., their costs aren’t subsidized by the Chinese government, and Chinese automakers satisfy U.S. government security concerns with regard to digital communications.

Surprisingly, the administration may be listening. President Trump has indicated he might be open to transplant factories, suggesting that if Chinese automakers are willing to build factories on American soil and hire American workers, the gates could open. But then again this is Trump, so there is reason to doubt that he will prioritize consumers’ preferences for affordable transport over the industry’s desire for a shielded market.

While protectionist trade policies have been the primary cause of the automobile affordability crisis, inefficient fuel economy standards and mandated safety regulations, neither of which are based on rigorous cost-benefit analysis, also have increased vehicle prices. Those policies should be discarded in favor of a composite vehicle-miles traveled tax that incorporates emissions and safety components. Such a system would paradoxically have a better chance of reducing emissions and climate externalities and improving safety because consumers would be less likely to stick with older cars. But that’s another story.

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Affordability as a political rallying cry that cuts across ideological lines is not likely to go away anytime soon. Economic growth, once seen as the all-purpose elixir to soothe social discontent, has lost its magic, in large part because the rising tide of the stock and home equity markets has lifted less than half of all the boats.

So many of the problems that seem to contribute to the affordability malaise result from government failure – think of land-use restrictions that make housing more costly, regulatory inefficiencies that bloat the cost of health care and pharmaceuticals, weak antitrust enforcement that has allowed the legal profession to be a self-regulated monopoly that serves a very small share of the public, and a government-run education system that costs ever more and delivers ever less certainty in the eventuality of high-paying jobs.

In the auto industry, government failure has allowed automakers to exploit tariffs to the detriment of consumers. The problem could be solved by an administration willing to prioritize consumer welfare over producer protection, but no administration has yet been willing to step forward. That fact may someday encourage an innovative administration to act. At the very least, it should surface in someone’s candidacy in the upcoming campaigns.