New car prices are on the rise. People are paying more money this year for new vehicles because inventories are tight, demand is high, incentive spending is low, and as a result, average transaction prices are higher than they were this time last year. This situation can be amplified as the global microchip shortage pertains.
Taking a look back at the first quarter of 2021, incentives spending had been tracking at 9.6% of ATP. This is the first time the measure has been below 10% since 2016. Tight inventories coupled with high demands give rise to lower incentives and higher profitability, well for automobile manufacturers. For car-buyers who are on the hunt for the best deals, this was not good news. “It’s getting more difficult for shoppers to find excellent deals,” said Charlie Chesbrough, Cox Automotive senior economist. “If price is the ultimate driver, shoppers might be wise to focus on segments of the market where inventory is healthier.” Taking a look at the APRIL 2021 NEW-VEHICLE SALES FORECAST by Cox Automotive, it is evident that compact cars and compact SUVs might just be the place for car-buyers looking for more options to choose from to score better deals.
Average transaction prices (ATP) as measured by the Kelley Blue Book team hit an all-time high in June at $42,258, up more than 6% from one year ago when the ATP for a new vehicle was still under $40,000. More surprising, in June, new vehicles sold at 99.9% of the manufacturer’s suggested retail price (MSRP). As inventory shrank through the second quarter, so did incentives. Incentive spending in the second quarter was at the lowest level in a decade. In May, the average incentive spend as a percentage of the average transaction price (ATP) dropped to a decade low of 7.4%.
Even though the automobile industry is expected to suffer from the global microchip shortage, there are certain manufacturers that have some decent budget-friendly options for car buyers who are shopping on a budget. Companies like Toyota Motor Corporation (NYSE: TM), General Motors Company (NYSE: GM), Honda Motor Co., Ltd. (NYSE: HMC) gave us budget-friendly options without compromising comfort and quality. Korean automobile manufacturers, Hyundai Motor Company (KSE: 005380.KS) and Kia Corporation (KSE: 000270.KS), dominate our list of the 15 cheapest new cars for 2021. The cheapest car on our list is manufactured by the Chevrolet Division of General Motors Company (NYSE: GM), the Chevrolet Spark. It continued to be the most affordable vehicle in America, with an ATP in June still under $17,000.
For the 15 cheapest new cars for 2021, we identified some of the most popular and best selling cars in the US and then sourced the manufacturer suggested retail price (MSRP) of the cars from their official websites. However, the MSRP of a car is not the only factor that makes it cheap. Realizing this, we sourced EPA-estimated mileage ratings from here. Another factor we weighed in was the True Cost to Own for each car on our list of the 15 cheapest new cars for 2021, determined by Edmunds. We included this metric so that you can compare 5-year totals for different vehicles and make a more informed decision.
The True Cost to Own (TCO) pricing system calculates the additional costs one may not have included when considering buying a new vehicle. These extra costs include depreciation, interest on your loan, taxes and fees, insurance premiums, fuel costs, maintenance, and repairs. The costs are calculated after the following assumptions, operating costs are estimated over a 5-year period, during which the vehicle would be driven for 15,000 miles per year. The vehicle is financed using traditional financing and is not leased. A 10% down payment is made on the vehicle at purchase. The buyer has an above-average credit rating, for the purpose of determining the finance rate, and the loan term is 60 months or 5 years.
Finally, to rank the 15 cheapest new cars for 2021, we gave the highest priority to the MSRP. Since the True Cost to Own is is a comparative tool, not a predictive tool and the actual 5-year cost of owning a particular vehicle may be different for individual circumstances, we gave it the second priority. EPA-estimated mileage ratings were given the lowest priority.
With this context and industry outlook in mind, let’s now take a look at the 15 cheapest new cars for 2021.
15 Cheapest New Cars For 2021
15. Honda Civic, Manufactured by Honda Motor Co., Ltd. (NYSE:HMC)
True Cost to Own: $27,629
EPA Combined City/Hwy Mileage: 34 MPG
As the first car on our list of the 15 cheapest new cars for 2021, we have the 2021 Honda Civic from Honda Motor Co., Ltd. (NYSE: HMC). The 2021 Civic deserves a spot on your wish list if you want a car that handles well, is fuel-efficient, offers an upscale interior, and has an optional turbocharged variant.
Honda Motor Co., Ltd. (NYSE: HMC) equipped their 2021 Civics with different powertrains, the most fuel-efficient being a turbocharged four-cylinder 1.5-liter engine. This engine is capable of pumping out 174 HP and earns up to 32 mpg in the city and 42 mpg on the highway, giving it an EPA-estimated combined city/highway figure of 34 mpg. Honda Motor Co., Ltd. (NYSE: HMC) covers the 2021 Civic with a three-year or 36,000-mile basic warranty and a five-year or 60,000-mile powertrain warranty. Edmunds estimated maintenance and repair costs to amount to $3,909 after 5 years or 75,000 miles.
14. Mazda 3
True Cost to Own: $33,530
EPA Combined City/Hwy Mileage: 31 MPG
The Mazda 3 is a sporty sedan that offers a user-friendly infotainment system, dynamic steering, a bump-free ride, responsive brakes, and quick acceleration. Mazda gave us the option for an all-wheel-drive powertrain in the Mazda 3. The vehicle comes with a 155-HP 2.0-liter engine as standard. You can get a faster trim, a 186-HP 2.5-liter engine, or a turbocharged 2.5-liter engine capable of producing 250-HP. The standard Mazda 3 sedan gets an EPA-estimated 28 mpg in the city and 36 mpg on the highway, giving it an EPA-estimated combined mileage of 31 mpg.
Similar to other manufacturers, Mazda 3 comes with a three-year or 36,000-mile basic warranty and a five-year or 60,000-mile powertrain warranty. Edmunds estimated maintenance and repair costs to amount to $4,888 after 5 years or 75,000 miles.
13. Toyota Corolla, from Toyota Motor Corporation (NYSE:TM)
True Cost to Own: $25,686
EPA Combined City/Hwy Mileage: 33 MPG
Toyota Motor Corporation (NYSE:TM)’s Corolla has been tried and tested for generations, actually being the best selling car in history (50 million sold since 1966).
Among the 2021 Corolla’s offerings, we have a user-friendly infotainment system, a comfortable drive, a relatively smooth and quiet CVT, and decent EPA-estimated mpg ratings. Toyota Motor Corporation (NYSE: TM) fitted a rather unexciting 139-HP engine as standard in the sedan, a trade-off between engine power and fuel economy. In this way the sedan has an EPA-estimated combined mileage of 33 mpg, it can do 30 mpg in the city and 38 mpg on the highway. .
Toyota Motor Corporation (NYSE: TM) backs the Corolla with a three-year or 36,000-mile basic warranty and a five-year or 60,000-mile powertrain warranty. You can buy a 2021 Corolla within $20,000, but the true cost to own a 2021 Corolla over 5 years as estimated by Edmunds, is about $25,700. Maintenance and repair costs after 5 years of owning and driving the 2021 Corolla sedan are estimated to amount to $3,478.
12. Hyundai Elantra
True Cost to Own: $26,332
EPA Combined City/Hwy Mileage: 37 MPG
Next in line among the cheapest new cars for 2021 is Hyundai Elantra, an excellent choice for a compact car that offers good value for money. In the standard configuration, the Elantra is powered by 2.0-liter engine that provides 147 horses. However, there is also a 1.6-liter turbocharged and even a 2.0-liter turbocharged version good for 201 and 275 horse power, respectively.
The Elantra can accommodate up to five people, and it can do so comfortably. Hyundai Motor Company discontinued its hatchback version of the Elantra, and it now comes as a 4-door sedan only. The standard variant boasts a remarkable EPA-estimated combined mileage rating of 37 mpg. The 2021 Elantra can earn up to 33 mpg in the city and 43 mpg on the highway.
Hyundai Motor Company (KSE: 005380.KS) backs the Elantra up with a five-year or 60,000-mile basic warranty and a 10-year or 100,000-mile powertrain warranty.
11. Nissan Sentra
True Cost to Own: N/A
EPA Combined City/Hwy Mileage: 33 MPG
Up next we have the Nissan Sentra, manufactured by Nissan Motor Co., Ltd. (OTC: NSANY). The Nissan Sentra comes with a long list of safety and driver assistance features that include forward and reverse automatic emergency braking, pedestrian detection, driver attention monitor, and automatic high-beam headlights among others.
Nissan Motor Co., Ltd. (OTC: NSANY) did not, however, pay attention to infotainment and performance. The 2021 Sentra comes with a 2.0-liter four-cylinder engine that is capable of generating a mere 149 horsepower. In the city, the Sentra would suffice but it gets rather loud on the highway with a hard foot. Nevertheless, Nissan gave us a quality cabin and a ride that handles well on road. Again, you can get the 2021 Nissan Sentra under a budget of $20,000, and the car has a combined EPA-estimated mileage of 33 mpg. City and highway mileage ratings are 29 mpg and 39 mpg respectively. Edmunds’ estimates for the total cost to own and maintenance and repair costs are not available for the 2021 Nissan Sentra.
10. Volkswagen Jetta
True Cost to Own: $28,600
EPA Combined City/Hwy Mileage: 33 MPG
We have reached the top 10 of our list of the 15 cheapest new cars for 2021 with the Volkswagen Jetta. Volkswagen AG really did put their thinking caps on to build a car that offers a lot for a small price. It is relatively roomy for its class of compact cars, features a user-friendly infotainment system, and boasts remarkable fuel economy. For the 2021 model, a major upgrade was the wireless capability of Android Auto and Apple CarPlay. The 2021 Jetta comes standard with a 1.4-liter turbocharged engine capable of generating up to 147 horsepower. However, there is also the GLI version that comes standard with a 2.0-liter turbo engine that pumps out 228 horsepower and has paddle shifters too for an enhanced driving experience. The 2021 Jetta can get 30 mpg in the city, and 40 mpg on the highway, as estimated by EPA. The combined mileage rating for the 2021 Jetta stands strong at 33 mpg. Volkswagen AG (OTC: VWAGY) backs up the Jetta with a four-year or 50,000-mile bumper-to-bumper warranty. The true cost to own and drive this car for five years or 75,000 miles comes out at $28,600, of which about $4,600 is credited to maintenance and repairs as estimated by Edmunds.
9. Hyundai Veloster
True Cost to Own: $29,854
EPA Combined City/Hwy Mileage: 28 MPG
Moving on, another model from Hyundai made our list of the 15 cheapest new cars for 2021. The 2021 Veloster is the only car on our list that has 1 door on the driver side and 2 doors on the passenger side, making it quite unique in our list of cheapest new cars for 2021. Hyundai Motor Company fitted the Veloster with a 147-horsepower four-cylinder engine as standard, which can be underpowered on the highway but is sufficient for a day-to-day city commute. However, other versions can include a 201-horsepower 1.6-liter turbocharged engine, while the performance-oriented 2021 Veloster N features a 275-horsepower turbocharged engine and comes with an eight-speed dual-clutch automatic transmission with paddle shifters and launch control. The 2021 Veloster has an EPA-estimated combined mileage rating of 28 mpg, below average for its class of cars. Edmunds estimates that owning a 2021 Veloster over 5 years would cost around $30,000, of which $3,500 will go to maintenance and repairs. Hyundai Motor Company (KSE: 005380.KS) supports the Veloster with a five-year or 60,000-mile basic warranty and a 10-year or 100,000-mile powertrain warranty.
8. Subaru Impreza
True Cost to Own: $29,960
EPA Combined City/Hwy Mileage: 26 MPG
The Subaru Impreza is the second car on our list of the 15 cheapest new cars for 2021 that features an all-wheel-drive powertrain. The sporty compact sedan manufactured by Subaru Corporation offers not only a sporty ride and a standard all-wheel-drive powertrain but also user-friendly infotainment controls, a roomy cabin, a moonroof, proximity keyless entry, push-button start, and automatic climate control.
Under the hood we can find a 2.0-liter four-cylinder that produces up to 152-HP, not that remarkable for a car of its class. EPA estimates for mileage lie within 22-28 mpg in the city, and 30-36 mpg on the highway, giving a combined EPA mileage of 26 mpg. The reason why the Subaru Impreza is on our list of the 15 cheapest new cars for 2021 is that you can buy one for under $20,000. According to Edmunds’ estimates, the cost to own an Impreza over a period of 5 years accumulates up to $30,000, of which about $5,000 goes to maintenance and repairs.
7. Kia Forte
True Cost to Own: $29,172
EPA Combined City/Hwy Mileage: 30 MPG
At number seven on our list of the 15 cheapest new cars for 2021, we have the Kia Forte. Along with its long list of safety features, the Forte has an upscale and roomy cabin, adult-friendly seating, a user-friendly infotainment system, remarkable fuel economy, and even a GT trim. The standard trim comes with a 2.0-liter four-cylinder engine that produces 147 horsepower and manual transmission, automatic CVT is available. The Forte GT shows off a 201-horsepower 1.6-liter turbo-four engine that can be paired with a standard seven-speed dual-clutch automatic transmission or a six-speed manual.
The combined mileage for the 2021 Forte sits at 30 mpg. In the city, the standard trim gets 27 mpg and on the highway, it can earn up to 37 mpg. Edmunds suggests that the total cost of owning a 2021 Kia Forte over 5 years amounts to about $29,000, of which $3,700 goes to maintenance and repairs. Kia Corporation offers one of the longest warranties among automakers. The 2021 Forte is supported with a five-year or 60,000-mile basic warranty and a 10-year or 100,000-mile powertrain warranty.
6. Kia Soul
True Cost to Own: $27,743
EPA Combined City/Hwy Mileage: 27 MPG
The 2021 Soul is equipped with a 147-horsepower 2.0-liter four-cylinder engine that comes with a manual transmission as standard, automatic CVT is available, but there is also a turbo trim that comes with a faster 201-horsepower 1.6-liter four-cylinder engine. The combined mileage for the 2021 soul is rated at 27 mpg. In the city, one can get up to 25 mpg, and 31 mpg on the highway if the person owns the standard manual Soul. Edmunds’ estimates suggest that the 2021 Soul, upon 5 years of owning and driving, will cost about $28,000.
Just like Nissan Motor Co., Ltd. (OTC: NSANY), Volkswagen AG (OTC: VWAGY), General Motors Company (NYSE: GM), Honda Motor Co., Ltd. (NYSE: HMC), and Toyota Motor Corporation (NYSE: TM), Kia Corporation (KSE: 000270.KS) gave us a budget-friendly car that does not compromise on comfort and quality.
5. Kia Rio
True Cost To Own: $27,428
EPA Combined City/Hwy Mileage: 36 MPG
Among the top 5 of the cheapest new cars for 2021, we have another Kia, Kia Rio . The 2021 Rio offers a remarkable mileage of 33 MPG in the city and 41 MPG on the highway, giving it a combined mileage rating of 36 MPG. Among the 2021 Rio’s offerings, we have a user-friendly infotainment system, good handling, an elegant cabin, and sufficient cargo space among other features. Under the hood we have a four-cylinder engine that pumps out about 120 horsepower. Edmunds estimates that the cost to own a 2021 Kia Rio over a period of 5 years is a little above $27,000, of which about $4,300 goes to maintenance and repairs.