New Cars Are NOT Too Expensive... You're Just Not Being Paid Enough

It's not just sports cars that kept up with inflation; regular mainstream cars did as well. A 2003 Toyota Camry cost $19,045 ($32,214 today). A new 2023 Camry can be purchased for as little as $26,320. It also includes features that barely existed in luxury cars at the time, such as adaptive cruise control and phone connectivity.

名字没有阻止车辆保持变化with inflation either. A 2023 Chevrolet Colorado starts at $33,995 for the WT model with four-wheel-drive. We chose that particular Colorado because the mid-size truck back in 2003, the S10, came with standard 4WD on the pricier Crew Cab model, which is now the only way you can configure a Colorado. That S10 with its wimpy 190-hp V6 cost $24,370 ($41,221 today).

The base 2023 Colorado produces 237 hp from its turbocharged four-cylinder, but you could still afford the 310 hp version for $35,415, which is less than the old S10 when factoring for inflation.

There are some exceptions when running that math, but they are uncommon and seemingly targeted to one vehicle category: full-size pickup trucks. The Ford F-150, for example, cost $18,975 in 2003 ($32,095 today). A new 2023 F-150 costs $33,965.

It's a bit more expensive, but not by much. In fact, both the Ram 1500 and Silverado 1500 are more expensive now when factoring in inflation. This can likely be explained by considering a few factors: new pickup trucks have way more safety tech than they did 20 years ago, trucks are larger today, and they are more fuel efficient.

We looked for other exceptions and came up with nothing. There may be a few random examples out there, but they are not the norm. Even supercars from Ferrari and Lamborghini have kept up with inflation.

As we've seen from the numbers, new cars are not as expensive as the average consumer thinks. There are many reasons for this, including a misunderstanding of how inflation works.

"I'm not sure people are good at calculating inflation-adjusted prices. They may have bought their last car four or seven years ago. They don't calculate inflation from that date to today, and they don't remember how much they earned back then and adjust that for inflation," says Professor Erik Gordon, Ph.D., University of Michigan Ross School of Business. "The comparison they make is simpler."

"Their last car cost $22,000, and the cars they are looking at today cost $32,000. That is a big jump, and even people who got a bigger wage jump, from $7.50 an hour to $15.00 an hour, think cars have gotten expensive."

Michael Brisson, Ph.D., Moody's Analytics Auto Economist and Director of Economic Research, takes a more calculated approach to how inflation impacts the car market. Working with Cox Automotive, Moody's put together what is called the Vehicle Affordability Index.

The study looked at vehicle transaction prices (not just MSRP) and interest rates to determine that vehicle affordability (measured by how many weeks it would take a family to afford a median vehicle) had increased significantly after the 2020 pandemic, starting the climb in mid-2021. For references, it would take the average family 33.5 weeks to afford the median new car pre-lockdown, and that number hit its peak in December 2022 at 45.1 weeks. Vehicle affordability has seemingly stabilized recently to around 43 weeks as new vehicle prices cool.

"This number was still 41% higher than the average transaction price between 2012 and 2019," Brisson points out in the study.

Brisson urged us to consider another key factor; automakers offered large incentives on vehicles pre-pandemic versus essentially nothing (or even a markup) today, meaning vehicles were realistically a bit cheaper than MSRP. We crunched some numbers from 2019 model year vehicles versus 1999 (the same time gap) and found that they were still cheaper in 2019.

Today, most cars are cheaper (when factoring for inflation) than they were 20 years ago. So why do new carsfeel更贵?我们认为答案是工资,specifically wage stagnation. The median household income in 2002 was $63,976 (according tothe US Census), which translates to $108,379 in today's money. You'd expect today's median income to be pretty close, right? Not at all! Today's median income is estimated at $80,893. In other words, your household is missing $27,486.

Let's imagine that another way; between you and your spouse, you should have an additional $2,290 monthly to spend on a car (or anything else). Theaverage new car price in the UShas skyrocketed lately to around $48,000, but even so, the average payment is around $725 per month.

You could afford three average new cars with only the missing money from your salary that didn't keep up with inflation.

"My numbers from 2012 to 2019 have [vehicle] transaction prices up 29% and wages up 29.7% between those seven years," Brisson explained, hinting that wages not keeping up with inflation may be a more recent phenomenon. "Between 2012 and 2023, there was a 60% increase in transaction prices compared to 44% for wages. I think it's more a pandemic story because wages can't rise as fast as transaction prices."

Whether it's pandemic-related or a general story of late-stage capitalism, we believe that wage stagnation is why cars seem so expensive when they are cheaper than they were at the turn of the millennium.

Cars have kept up with inflation just fine and improved along the way. Wages, on the other hand, have lagged behind. So the next time you complain about a car being out of your price range, don't blame the automaker; blame your employer.