An average new car price of £40k is simply too high for most people

It’s two years, almost to the day, since I argued that Elon Musk was making so much money out of his cars that he could afford to charge less for them. And to be fair to the Tesla CEO, he has since reduced the prices of some of his models. So far, so good. 

But now the richest bloke in the motor industry has gone and spoilt it all by fighting for and taking a $56 billion (£44 billion) remuneration package.

Now I’m the first to acknowledge that a brilliant, hard-working, risk-taking, game-changing car guy such as him should be handsomely rewarded for the job he does at Tesla. But something inside me also says it’s almost obscene for one person to be remunerated to the tune of £44,000million for his motor industry work alone. Someone has to pay for these scores of additional billions for the great man. And, ultimately, the people who’ll be paying will be customers buying Teslas (which already tend to have profit margins on the high side). 

If CEOs at other motor-manufacturing companies follow Elon’s greedy example and start demanding pay packages of similar eye-popping magnitude, I fear they might contribute further to the growing and very real problem of consumers being priced out of the new-car market. A combination of ever-rising official retail prices, massive hikes in the cost of annual insurance policies, and other car-related financial headaches are already forcing countless traditional new-car buyers down the second-hand route. Progress? What progress?

It’s just been revealed to me by Auto Trader that its “median new car RRP” figure for April 2024 was £41,738, rising to £42,340 in May – proving that already-high showroom prices continue to rise. And the informative, deeply depressing Confused/WTW car insurance price index says premiums have now risen for nine straight quarters; prices paid by customers have rocketed by a record 58 per cent in one year, with this monetary mayhem resulting in the average premium now costing £995. So think of ‘averages’ of 42 grand-plus (in addition to hefty interest charges) out of taxed income for the private motorists buying that typical but fairly modest new car, plus another grand to insure it.   

How are proud retirees on basic pensions or salt of the earth workers on average salaries (or less) supposed to find this sort of money to buy new cars and car-related products they could once afford? The cold, harsh truth is that they can’t and won’t. They have no choice.

Before telling them that they’ll just have to put up with second-hand cars, remind yourself of this often forgotten fact: there can only be a decent supply of affordable used cars if enough comparatively expensive new cars are purchased months or years earlier. And as the industry trade bodies keep telling us, we’re not buying nearly as many brand-new models as we used to. Why? Because too many are now beyond the financial reach of the motoring masses who can perhaps afford 20-odd, maybe even 30 grand for the ‘average/median’ new car, but just can’t stretch to £40,000-plus. The bean counters and pricing ‘experts’ at vehicle manufacturers need to rip up their RRP lists and start again.

Are new cars too expensive? Let us know your thoughts in the comments section...