Are cars getting cheaper or are we getting paid more?
The first quarter of 2007 wasn't exactly a banner period for car sales, and the average price of a new car went down $550 vs. the fourth quarter of 2006, so says a study performed by Comerica Bank. That extra $550 represents 1.5 weeks less of overall family income to pay for a new vehicle than the aforementioned fourth quarter, which Comerica chief economist Dana Johnson said was attributable to higher incentives, a poor housing market, and higher gas prices.
The study shows that the average new vehicle purchase averaged $28,200 per light vehicle sale in Q1 2007, which is up 1.6% from last year's first quarter. The good news is that the average family income rose by a healthy 3.7% during that one-year span. Americans still need 24.7 weeks of median family income to pay off their new vehicle purchase, but it's better than the 25.2 weeks of the first quarter in 2006.
While it's good news that our pay is rising at a higher rate than the price of new vehicles, we think a lot of it has to do with the softening demand for pickup trucks. With gas pricing going up steadily in April and so far in May as well, we're curious to see what the next quarter will look like.
[Source: Automotive News - sub. req'd]
Reader Comments (Page 1 of 2)
Evan Brom 6:15PM (5/10/2007)
I think it is a mental block. People don't want to break the 30k or 40k price barriers. That along with higher gas prices people are choosing smaller cheaper cars.
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imjon 6:30PM (5/10/2007)
psyche! you gettin paid for that brainwashin. You know damn well car prices have gone off the charts AND more so that everything else. Fool ! Damn foolish statement. Now tell everyone who you really work for.
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Kaveh 6:51PM (5/10/2007)
car prices have gone nuts, a cheap brand new car out of the dealer is going to set you back $18k, I remember buying a Mazda 323 in 1991 for $7500, my family went to get another one in 1995 at the same dealer and it was double the price for the same car.
It it worth it to buy a car that is one to two years old, thats what I have done for the last four cars. My current car, a Jetta I bought a year old and saved about 6 grand compared to new.
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Viv 7:10PM (5/10/2007)
Are you kidding me? I missed the memo that cars became cheaper. As #3 said it is best to buy one or two year old cars. I recently purchased my '06 Pontiac Grandprix for 12K. The dealer is selling the same cars new for 22K+.
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Jon 7:14PM (5/10/2007)
Inflation adjusted your $7,500 car in 1991 would cost $11,000 in 2006 (see http://www.westegg.com/inflation/ to perform the calculations). That is about $5,400 less than you can get a new 3 for (This site http://www.carreview.com/cat/automobiles/midsize-compact/mazda/PRD_292493_1531crx.aspx has the price at $16,400) but the new 3 is more powerful, faster, roomier, safer and more luxurious. We just expect much more from our cars, even the "cheap" ones than we ever have. Overall that's a good thing, I think.
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iorange 7:26PM (5/10/2007)
I have always leased cars.. when it came time to buy a car (when I could no longer employee lease) I bought a 2 year old svt focus.. car was in perfect condition (still is) with only 22k miles.. it still smelled new, and it was nearly half price of what it was 2 years prior. Hell, I've had it for 6 months, and am loving it; and who has to know I wasn't the original owner? I don't honestly see myself buying a new car when I can get one that is a couple years old in perfect shape. I mean it's awesome that it's a new car, but once it leaves the dealer's lot it's used.
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datguy 7:28PM (5/10/2007)
Look at the cost of new cars.. You can't get anything decent for under 20k anymore without incentives.
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Tim 8:43PM (5/10/2007)
"I remember buying a Mazda 323 in 1991 for $7500, my family went to get another one in 1995 at the same dealer and it was double the price for the same car."
Unlikely. If memory serves, Mazda discontinued the 323 after MY1994 and introduced the Protege for MY1995, but let's accept the proposition that the Protege is "the same car." Unlike the 323, it had two airbags as standard equipment, and ABS on two out of three trim levels. And God only knows how many sensors and emissions controls and computer chips had entered the picture between 1991 and 1995.
These technologies weren't cheap in 1995, and they (or their modern counterparts) aren't cheap now. People expect -- and the government increasingly requires -- a whole lot of safety gizmos before a new entry-level car is allowed to hit the roadways. In some cases the gizmos themselves are surprisingly expensive to manufacture reliably (airbags) and in other cases they have high R&D costs (traction control).
Everyone can think of someone they know who died in a car wreck. We expect to pay top dollar for our cars to be safe, and we do. If we were willing to tolerate a 10% increase in fatalities, or to tell the government to allow the market to truly differentiate into "safe" cars versus "affordable" cars, some new cars would be substantially cheaper. But the trend has been for Volvo, Daimler, BMW and Saab to invent new safety technologies that cost untold millions to develop, and then within five years of their introduction we're mandating that they be implemented in cars that recent college grads can afford. That will push a car that should cost $12K into the $16K range with a quickness.
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tom 9:10PM (5/10/2007)
The government keeps telling us peons that inflation is in check. I say bullshit. The prices of cars, The prices for cars,homes,gas and food, everything everybody needs, is out of control. They say they raise interest to keep inflation in check but the price of everything still goes up and your just paying a higher interest rate and overall paying more for items you buy on credit overtime. I say banks better not get too gready or they will have no customers left because we will all be broke.
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EnviroBob 9:20PM (5/10/2007)
#3 Car prices are not "going nuts". The '91 base model 323 had a base price (MSRP) of $6899. Add power steering, automatic, air conditioning, cassette, floor mats and destination charge and the price climbed to $9,487.00 or $14,034 in current dollars. Today, if you pay full retail, you can purchase a Hyundai Accent, with roughly the same interior space as the 323, for $13,530. Not only is it $500 less than the 323 was, the Accent has airbags, a CD player, better crumple zones, interior air filtration and a 10 yr / 100,000 powertrain warranty. If you compare both cars with 5 speeds, the Accent is $918 less than the 323- excluding the $500 rebate curently offered.
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FrankTheCrank 9:41PM (5/10/2007)
$28K...yeah, I got that in change, just sitting in my front pocket.
I look around and everyone's got a new car. Whatever happened to making a car last? My 98 is still working fine, sure it needs a little work, but it starts and runs everyday. And, it's free. Been paid off for over 4 years already.
Shit, their still driving 1950's sedans in Cuba. LOL.
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JN 10:01PM (5/10/2007)
Cheaper? Where? Can somebody tell me, please? I'm sure not seeing it around here.
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iQuack 10:37PM (5/10/2007)
Car prices are hard to compare because today's cars are more elaborate and safer than in the past.
After accounting for inflation plus: air bags, ABS, stronger structures, standard power windows, etc., car prices haven't increased--I think they've decreased, all things considered.
A '63 Valiant sedan with upscale interior and A/T. but without power steering or power brakes, roll-up windows, no seat belts or other safety equipment or tilt steering wheel or seat height adjustment, etc., etc., etc. was priced at about $2150 if I remember correctly. That would be $14,439 in 2007 dollars.
You can buy a much better-equipped car today for that price or pay less to get a bare-bones Yaris, Focus, Kia, etc.
As I see it, cars are cheaper today--certainly more affordable for more people than ever before in the U.S. That's why you see so many expensive cars and SUVs around--more people can afford them.
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LaserBeams 1:45PM (5/11/2007)
http://72.14.205.104/search?q=cache:mPGVNTeg37AJ:cta.ornl.gov/data/tedb25/Spreadsheets/Table10_10.xls+average+price+of+a+new+car&hl=en&ct=clnk&cd=4&gl=us
Cars appear to be staying about the same price. 'We' (whoever that is) must be getting paid more. I wish I were getting paid more. :P
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EnviroBob 10:56PM (5/10/2007)
Let's compare base prices in constant dollars, 1991 vs 2007:
1991 LTD Crown Vic LX $18,863 = $26,750 in 2007 $
2007 Crown Vic $27,615
1991 Crysler 5th Ave $20,875 = $30,880 in 2007 $
2007 Chrysler 300 Touring $28,320
1991 Buick Park Avenue $27,420 = $40,562 in 2007 $
2007 Buick Lucerne CXL $34,775
1991 Mazda Miata $14,200 = $21,006 in 2007 $
2007 Mazda Miata $21,585
Seeing as all of these vehicles have a lot more standard equipment, better safety features, lower emissions and better gas mileage, I'd say they're all pretty much cheaper.
People want to look at prices as though their value remains constant- such as people who say that they only paid $1.21 for gas in 1980 and don't comprehend that they were paying the equivalent of $2.98 a gallon in today's money.
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Vehicles Exporter 11:31PM (5/10/2007)
Hi there! It's obvious that the pricing of brand new cars today are getting higher so it's the responsibility of the buyer to do some canvassing just to be sure that you'll get the best deal! I know that Japan is most famous for compact cars due to their effective fuel consumption and pretty cheap cars! The recent Hybrid cars also getting popular day by day. Fuel prices are rising and so is the demand for Hybrid cars. Recently HONDA CIVIC HYBRID is named as Car of year at USA car show. Famous models of Toyota are gaining importance in todays life, most favourites are :
Toyota Prius, Lexus , Alphard and Estima Hybrid. If you wish to check more info on these cars, even for used Japanese cars selling you can take a peek at this web site: www.nexusscars.com. Thank you so much for sharing and keep em coming! Have a good one! :)
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iQuack 11:17PM (5/10/2007)
EnviroBob, you are correct. Keeping an inflation calculator handy is a good idea--I like this one:
http://minneapolisfed.org/research/data/us/calc/
Every time I think about how much MORE something costs than it did a number of years ago, I make an inflation adjustment. Sometimes I'm surprised to see that in REAL terms, an item is cheaper.
Example: a basic, plastic SWATCH watch cost $25 in 1983 and now costs $50 for what appears to be the exact same product. But $25 in 1983 had the same purchasing power as $51.58 has today, so today's $50 Swatch is a bit cheaper now.
Of course, it's not quite that simple because it's not always clear what "average" inflation is. Disparate goods and services often have quite different inflation rates over a given period.
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megelsh 5:50AM (5/11/2007)
Cars getting cheaper? Another 30 something idiot remark.
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Dan-O 7:25AM (5/11/2007)
Let me get this straight, a bank that makes millions of dollars financing cars, is trying to convince me that cars have actually become cheaper. I’ll file that right next to the PB “study” telling me their gas really is cheaper.
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Scott 9:25AM (5/11/2007)
What about post #15 don't you guys understand?
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