November 11, 2008

History of new car costs and average inflation

CPI data

The Bureau of Labor Statistics tracks the Consumer Price Index. One of the prices they track is new vehicle costs. THey have data on prices for new cars dating back to 1935. The following is a graph of the price index from 1935 to 2007:

You might notice the gap in data points during the mid 1940's. This was the period during WWII when US production of personal automobiles was halted in order to use manufacturing capacity for the war effort.

From 1935 to 2007 vehicle prices rose 2.7% average annually. For the last 20 years during 1987 to 2007 prices have only risen an average of 0.9% per year.

Looking at individual decades the annual rates were:

1940's 6.8%
1950's 2.3%
1960's 0.3%
1970's 5.2%
1980's 3.2%
1990's 1.4%
2000's -0.4%

Yes prices are actually going down this decade. That is a reflection of people buying smaller and more affordable vehicles.


Prices versus wages

The company Comerica tracks auto affordability. One way they look at it is to put new car prices in relation to wages. The chart below, from this report from Comerica, shows the number of weeks worth of median wages that an average consumer would have to work to afford a new vehicle:


Spot check on prices in 1949 versus 2008

If you look at actual car prices from 1949 as listed in The Peoples HIstory, you get real world values. They list 14 prices for 1949 ranging from $1,472 to $3,497. The average of the prices given is $2,680. In 2008 prices range from $10,235 at the low end for a Chevy Aveo to a very high figure for exotic luxury imports. The average price for a new car in 2008 is $27,704 according to Comerica.

If we compare the low prices of $1,472 in 1949 to the low price of $10,235 in 2008 that would be an average annual increase of 3.3% If we compare the mean prices of $2,680 in '49 and $27,704 in '08 that gives an increase of 4.0%

This method and the resulting numbers should be taken with a grain of salt. The prices for 1949 given in the Peoples History are only a handful of data points so this is not that reliable of an estimate and the margin of error for that is higher.

What do you get for your money?

Another important aspect of new car prices to consider is how much vehicle you get for the price. Its reasonable to say that today's car is twice as good as a vehicle from the 1940's. Cars last longer, have more power, get better fuel economy and are safer.

One example is a 1949 Lincoln Cosmopolitan convertible. The car cost $3,948 in 1949. It had a V8 engine that got 152 HP and 8 miles per gallon. There were no airbags, no seatbelts and few modern features.

Today in 2008 you can get a Mazda Miata for $20,635. The Miata has 166 HP and gets 22 MPG city/ 27 highway. It has front side airbags, anti-lock brakes, an AM/FM CD player and remote entry as standard features.

The Miata will likely last twice as long as the Cosmopolitan. In the 1950's to 1970's a car would not be expected to last over 100,000 miles. But todays cars should last for 150,000 to 200,000. The new cars are MUCH safer. If you look at fatality rates per miles driven, from 1966 to 1996 the fatality rate per 1 million miles driven dropped from 5.5 to 1.7.

By every objective measure the Miata clearly performs better. It lasts twice as long, it is much safer and it has better fuel efficiency.

13 comments:

  1. Very interesting stats! It's amazing to think that cars have actually become more affordable over time, unlike most everything else (including the gas that fuels said car)!

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  2. I am looking for your sources. I see you have links to the CPI and other databases, but can you advise as to the actual tables or charts in the context of their respective studies? Thank you! An email sent to evan [at] evanmade [dot] com would be much appreciated!

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  3. Evan,

    For the CPI numbers, I start at bls.gov/cpi then on the main page scroll down to the Databases section. Under "All Urban Consumers (Current Series ) (Consumer Price index - CPI)" I select either the "one-screen data search" or "multi-screen data search". Then using the search interface you can find the "item" for "New Cars".

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  4. Anyone old enough to remember way back when?
    I replaced my automobile about every three years....when they cost $2,000-3,000 or so. Not to compare all the gadgets.
    That indicates that I purchased about 10 automobiles over 30 years, plus extra ones in the family. (Actually, I’ve owned 23 vehicles since 1953)
    My last cost $27,000, now 8 years old and expect to keep it for 10 years or longer.
    If I spend the same amount, $30,000 over 30 years, that's a total of 3 new automobiles compared to 10 over 30 years.
    Where are the jobs?
    How many workers does it take to produce 10?.................3?
    Back then STEEL auto bodies could be repaired, dents tapped out. Aluminum must be replaced.
    Mr. Trumka, Listen up,
    Are we better off than we were way back then? Have your unions, any working man, increased wages by 10 times? If so for some, How many jobs has it cost?
    Has your income increased 10 times? hmmmmmm

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  5. how about doing some calculations considering the current value of the 1947 Lincoln? here's what i found when i googled the car, "As a recent value comp, a 1951 Lincoln Cosmopolitan Convertible from the Schudroff collection sold in Monterrey at the Gooding & Company auction in August of 2009 for $137,500."

    So, not sure what a 1947 would go for, but it looks like it would've been a good investment, and would be worth many Miata's

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  6. sorry typo above, meant 1949 Lincoln

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    Replies
    1. Assuming the Lincoln cost $1500 new in 1949, if you had instead invested that money at an average interest rate of 3% per year, today you would have over $3.2 million. So I have to disagree with your assessment of the investment potential for a 1949 Lincoln.

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    2. My mistake. I did not read the linked article. A 1949 Lincoln actually cost $3186 new. So using the above, you would have made just under $7 million. But you get the idea ;-)

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    3. Sorry but that math is not right. If you had $1500 in 1949 and invested it at 3% annual growth you'd end up with about $9,946 today. $3186 would grow to $21,126.


      Jim

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  7. Poor comparison of a Lincoln to Miata, big passenger car vs a two seater. doesn't matter though, a fully equipped Ford F-150 Platinum is $62,000 if you include sales tax and property tax. Compare that to the average home value for middle America and it is less than 2-1, which is a much smaller ratio than 40 years ago. As far as reliability, I had to replace the engine and transmission on my $43K Chevy LTZ Silverado, about $13K all together, I could have done the work myself on the older simpler vehicles. Vehicles have become terribly expensive because of technology and perceived efficiencies....it's all bunk, technology IS the root of all that's evil.

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  8. Building new cars every year with new gizmos to suck in a potential buyers is the real issue. The world is saturated with cars and if we are all truly concerned about pricing, we would stop buying new. Anyone who goes into debt for a car costing $50K to $80K is just plain stupid. I drive a 1996 that cost me $2K cash over 3 years ago and it is still getting me from point A to point B and back again. People need to recognize they are being sucked in by the big commercial wheel.
    Its' got nothing to do with price and everything to do with common sense. Those without common sense just drive up the very thing they whine about. Cost, cost, cost!

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  9. You should update this data to 2014. You can't get buy a pickup for South of $30k.

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  10. MSRP on a Chevy Colorado regular cab is under $17.5k.
    Looks like every truck brand on the market has something under $25k

    Jim

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