Cars in the 1920s – The Early Automobile Industry


Although the automobile had been invented decades before the 1920s, they were so expensive few people could afford to have one.

Mass production, combined with innovations in design and sales, drove prices down and made them more affordable.

More People Own Cars

In 1918, only 1 in 13 families owned a car. By 1929, 4 out of 5 families had one. In the same time period, the number of cars on the road increased from 8 million to 23 million. In fact, the industry grew so fast, by 1925 over 10% of all people in the workforce had something to do with production, sales, service, or fueling of automobiles.

The Curved-Dash Olds and the Model T

In 1901, Ransom Olds marketed his curved-dash Oldsmobile to the middle class. Even at 40% of the cost of other cars on the market, the $650 price tag was more than the annual income of a middle class family. In 1908 Henry Ford announced plans for his Model T. He wanted it to be more affordable, but it still sold for $825.

Ford began thinking about ways to reduce costs. He came up with the idea of using interchangeable parts on an assembly line. Instead of a single worker producing a car from beginning to end, each worker would be trained to perform a single task in the process. By 1914 he had reduced the cost to $490, and by 1921 the Model T cost only $310.

Buying on Credit

At first, a buyer had to have cash to purchase a car. Banks were unwilling to lend money for something that was difficult to seize if the borrower stopped making payments. A car could be moved from place to place, unlike a house or land.

In 1919, General Motors and Dupont introduced the concept of buying a car on credit. But instead of getting financing through a bank, they formed the General Motors Acceptance Corporation (GMAC). By 1926, 75% of all car buyers were entering into credit purchase agreements.

Marketing the Automobile

The Model T had been built as an affordable, durable automobile. But with the new credit plans other car manufacturers were offering, consumers could purchase a more expensive model — with a few “extras” such as electric starters — without increasing their monthly payment by that much.

The industry began to use advertising to convince people that they needed the latest and greatest new car. “Planned obsolescence” created the impression that a new car was out-of-date within a year of its purchase. A redesigned fender or new paint color played into the growing consumerism of the era.

New advertising techniques associated a car brand with social status, sex appeal, and power. Reliability and affordability played a much smaller role in the whole package.

While Ford had built the Model T to stand the test of time, other companies tried to convince people to purchase a new car every few years. This practice created a brand new category of sales — the used car.

Ford’s Sales Decline

Between used car sales to lower income families, and attractive financing options on new cars for the middle class, Ford began to see a decline in sales. After resisting change for several months, Ford finally chose to shut down production from May to November 1927 to design a new car and re-tool his factories.

Ford sold 300,000 Model A’s before the first one appeared on the market. It quickly became the most popular car, but the unplanned shutdown had cost Ford plenty. With over 40 other companies making cars in 1929, competition began to increase.

The Car’s Influence on Society

The automobile changed the way people worked, conducted their business, and shopped for needs and wants. Doctors were among the first to buy cars, which made it easier for them to make housecalls. Police officers could now answer calls more quickly than on foot or horseback.

Cars also changed how people spent their leisure time. It gave us easy access to the world beyond our neighborhoods, our cities, and even our states. With a car, some extra income, and more leisure time, motor vacations became popular.

New Automobile Inspired Businesses

With more cars on the road, the landscape began to change as well. Roadside motels sprung up along newly paved streets. Before World War I, gas stations were little more than a pump set up in front of a shack. As the decade progressed, gas stations began to resemble neat little houses. They offered a wider variety of services as well, including engine repair, tire changes, and battery and headlight replacements.

Also before the war travelers had few places to purchase a meal on the road. In the 1920s thousand of cafes, BBQ joints, and ice cream stands sprung up.

Flashy neon signs, introduced in 1923, tried to entice the passing motorist into stopping at an establishment. Life would never be the same.


  1. Daily Life in the United States, 1920-1940 by David E. Kyvig
  2. The 1920s by Kathleen Drowne and Patrick Huber