Sales of smaller-than-usual cars and SUVs surged in 2024 as Americans prioritized affordability.
For years, American car buyers have been opting for larger, roomier vehicles, with some automakers even discontinuing compact cars and sedans due to sluggish sales. But with new car payments skyrocketing in recent years, some consumers are returning to smaller vehicles as they consider that larger vehicles aren’t always the best choice when buying a new car.
Sales of some small cars like the Honda Civic and Nissan Sentra are expected to rise 23% or more through November 2024, according to research firm Motor Intelligence. That’s far outpacing the industry’s overall growth, which is in the single digits this year.
By contrast, sales of full-size trucks—a profitable segment for Detroit automakers—fell 1.9%, according to data from the auto shopping website Edmunds. Sales of midsize SUVs, often favored by families, also fell 2.3% from 2023.
The growing interest in smaller options comes as car ownership becomes increasingly difficult to afford. The average price of a new vehicle remains at an all-time high, surpassing $45,000 by November 2024, according to J.D. Power. Insurance premiums, finance rates and repair costs have also climbed in recent years, further straining household budgets.
As costs rise, some buyers are willing to sacrifice size and space for lower monthly payments, analysts say.
“They need the functionality that the car provides, but they need to buy a smaller size,” said Charles Chesbrough, senior economist at Cox Automotive, adding, “It fits their budget.”
Whether this trend continues will depend on interest rates and fuel prices in the coming years. President-elect Donald Trump’s promise to impose a 25% import tax on goods made in Mexico and Canada could hurt affordability, as many automakers build their cheaper cars in Mexico to take advantage of lower labor costs.
The price difference between larger and smaller models can be significant. The average price paid for a small SUV last year was about $29,000, according to Edmunds. For midsize and large SUVs, consumers paid an average of $48,000 and $76,000, respectively.
Toyota, Honda and other Asian brands are benefiting greatly from this shift, having long led the market for small sedans and SUVs, some of which start at less than $25,000. Many of these brands have kept small cars in their lineups after rivals abandoned them.
Some models like the Mazda 3 and Honda HR-V recorded double-digit sales growth over the past year.
In the small car segment alone, sales were up 16 percent through November, and their market share in the U.S. has recovered after declining in recent years, according to data from Edmunds.
Sales of small SUVs also rose 11.5% over the same period, as automakers expanded their options for buyers seeking more utility and seating in a more compact size. These models now account for about 27% of total U.S. sales over the past year, up from 22% before the pandemic.
Sales of full-size SUVs also continue to grow, but that’s largely driven by families needing more space or greater cargo capacity and finding it difficult to downsize, analysts say.
With lower prices and better fuel economy, small cars were once seen as a way to attract younger buyers to a brand. The strategy was to attract customers early in their lives and then sell them more expensive models of the same brand as they got richer.
But car buyers are starting to wait until they’re older to buy new cars. Years of cheap gas prices have helped cement the dominance of large SUVs in the U.S.
Shifting car-buying trends have led many automakers to phase out their lower-priced sedans and hatchbacks. This has left consumers with more expensive options. The number of new cars priced below $25,000 has dropped from 45 in 2019 to just 11 last year, a significant drop in just five years, according to a Wall Street Journal report.
To fill this gap, automakers are introducing lower-priced compact crossovers aimed at more budget-conscious consumers, but these efforts have yet to fully fill the void that budget models once provided.
