Why aren't cars less expensive?

[timhau]

I suspect, though I haven't researched this, that, on top of other factors listed above in other posts, the raw materials of cars have become more expensive and that these raw materials are a forced cost due to safety standards.

And not only have raw material costs gone up, but at least if weight is any indication, they require more of them nowadays. The weight of a small 1970s car (Toyota Corolla, Fiat 128) is something like 700-800 kilograms. My wife's two-year-old Toyota Yaris weighs well over a metric ton.

 

[Furcifer]

It's part of the gimmick They constantly put new technology in luxury cars that people see and want. These become standard options in the following years. Some of them aren't, seat belts, disc brakes, air bags and other safety features are mandated. The rest of the ridiculous things are. Remote car door openers used to be a costly feature in 1991, now they are standard. You now get a "better" car for the same price. At least that's what marketing wants you to believe. And don't think it's not calculated, without them the profit margins decrease substantially.

Material costs have probably come down, but I'm not sure. I can tell you this, when I scrapped out a van body before it went up to paint it cost the company $1500. That's the underbody (floor and frame) both aperatures (or sides) and the roof, including labour. By the time you paint it, bolt on some doors, throw an engine and drive train in it and add trim you can't have more than $10K in it. That's a full size van that sold for $40K. It always baffled me where the rest of the cost went. I know they claimed profit was about $2850 per vehicle.

 

[Furcifer]

Still with modern CNC machining that should effect the price of some mechanics.

I can't think of anything that's CNC'd on a production car? A couple small parts in the engine? Everything is pretty much cast and stamped.

 

[drkitten]

True electronics and mechanics should not be compared. Still with modern CNC machining that should effect the price of some mechanics.

And it does, but nowhere near to the same degree that Moore's law affects electronics.

It takes roughly the same amount of aluminum to make a beer can today that it did in 1970, because twelve ounces of beer is still twelve ounces of beer. It takes roughly the same amount of plastic to make a picnic fork today as it did forty years ago, because our mouths and hands are still roughly the same size. It actually takes more paint to paint a house today, because houses have gotten larger on average.

It takes one-billionth the amount of silicon today to make an eight-bit microprocessor as it did in 1970. In 1970, raw materials were actually a significant part of computer prices.

 

[ponderingturtle]

I can't think of anything that's CNC'd on a production car? A couple small parts in the engine? Everything is pretty much cast and stamped.

Engine parts are machines I am sure. Likely transmission parts too. You just can't stamp a cylinder for a car for example. Still of course the reduction in costs there are still orders magnitude less than for electronics.

 

[Furcifer]

Engine parts are machines I am sure. Likely transmission parts too. You just can't stamp a cylinder for a car for example. Still of course the reduction in costs there are still orders magnitude less than for electronics.

Cylinder blocks and heads are cast, the sleeves are probably CNC. But you're right, the tranny would have some CNC'd parts as well.

I just texted a buddy to see if he knows what an engine's worth. A Triton 5.4L is worth $3000. A finished head (he worked at Essex Aluminum) is worth $200. I think I can find out the price of a GM transmission is worth.

 

[kevinquinnyo]

That's why I mentioned mandated features in the OP. I do think they play a big role, but hey, seatbelts were mandated in '68, catalytic converter in '75. So I guess I was wondering if these features along with features of consumer preference, can explain the lion's share of the increases. It seems to me, however, that certain advancements should be able to offset some or a lot of these costs over time.

The most important thing here is that you are comparing average income to average car price from two different decades.


I'm saying it's not that simple.

For instance, if you use the CPI method of calculation:

In 2006 $2,822 from 1968 would be equal to ~ $16,348.

If you calculate using the unskilled wage method, meaning, in simple terms, how much labor would it take now versus then to get the car:

You end up with: $16,789

Both of these figures are below the average car price of 2006.

There are actually many other ways to calculate the relative worth of things or purchasing power from then to now.


That said, and completely aside from the method of calculation, the reason I brought up the concept of a commodity, is due to the fact that commodities are the same no matter what year it is. Copper is copper.

Technology makes it easier to extract, ship, etc, but it's still copper.

A dvd player, in that sense, behaves much like a commodity. It's the same product, (box that plays dvds) but with a more efficient and cheaper means of making a box that plays dvds.

A complex machine like a car, doesn't really work like that. Certain parts of the car (bolts, brackets, hell I actually don't really know) you could argue, are the same as they were in 68, but the overall product is apples versus oranges during a 30 year span, which further complicates the comparison in price.

 

[kevinquinnyo]

It is actually interesting.

Obviously, as someone else mentioned, part of the difference between the apple and the orange here, is that cars today require less maintenance, and last longer., hence higher cost.

But with most other types of products, for instance, a coffemaker, I have a choice of paying a little more for something that will last longer, or opting to save money initially, and take on the risk that it might break sooner.

Are cars different than coffemakers in this way?

Would looking at the average cost of a used car in 1968 versus a used car in 2006 change anything?

Could it be that the luxury car market has increased, skewing the mean from the more functional days of the sixties?

I don't know the answers to any of those questions.

 

[LTC8K6]

http://cache-02.gawkerassets.com/assets/images/12/2009/12/2011_mustang_gt__3_.jpg


Such beauty just costs more...

 

[Leif Roar]

Um -- Then what is a computer? Or a DVD player? Or a CD player? Seems to me They're machines that have gotten less expensive over the decades even as the technology has improved.

Actually, from about 1980 through around 2000, the cost of a high-end desktop PC stayed pretty much constant -- you just kept getting more and more for that price. It's only in the last few years that the actual price has dropped significantly.

 

[Puppycow]

Well there are actually cheap cars, like The Tata for about $2500.

But I think most car consumers in developed countries don't want an inexpensive no-frills vehicle in that price range. If more people just bought the cheapest car, carmakers would respond to the demand and compete on price, and we'd see more really cheap cars on the market.

 

[IchabodPlain]

The most important thing here is that you are comparing average income to average car price from two different decades.


I'm saying it's not that simple.

Two things:

1) I first compared actual price (adjusting for inflation)

2) Because the actual price has increased over that time, I checked to see if wage increases outpaced the increased in car prices.

In both cases cars are more expensive, both in absolute price and relative price.

For instance, if you use the CPI method of calculation:

In 2006 $2,822 from 1968 would be equal to ~ $16,348.

If you calculate using the unskilled wage method, meaning, in simple terms, how much labor would it take now versus then to get the car:

You end up with: $16,789

Both of these figures are below the average car price of 2006.

Exactly, even using the unskilled wage method, cars are still more expensive today.

 

[IchabodPlain]

And not only have raw material costs gone up, but at least if weight is any indication, they require more of them nowadays. The weight of a small 1970s car (Toyota Corolla, Fiat 128) is something like 700-800 kilograms. My wife's two-year-old Toyota Yaris weighs well over a metric ton.

Yet, in the 1970's cars were more expensive than in the 1960's. I should think that the cost of materials (to the automakers) have gone down because not only are cars smaller now, but they use less steel and more aluminum/plastics in manufacturing.

 

[dropzone]

The early motorcars were simple, but they weren't durable by modern standards. They needed constant maintainance, and that meant that the operating costs were high.

Road & Track's Peter Egan drove from Wisconsin to California in a Ford Model A. Every night he and his partner pulled the engine's main bearings, melted them down, and recast them (they were made of babbitt metal). People these days forget how unspeakably ****ty most cars were well into the '80s.

ETA: Steel's cheap. Aluminum costs more than steel.

 

[IchabodPlain]

And it does, but nowhere near to the same degree that Moore's law affects electronics.

It takes roughly the same amount of aluminum to make a beer can today that it did in 1970, because twelve ounces of beer is still twelve ounces of beer. It takes roughly the same amount of plastic to make a picnic fork today as it did forty years ago, because our mouths and hands are still roughly the same size. It actually takes more paint to paint a house today, because houses have gotten larger on average.

It takes one-billionth the amount of silicon today to make an eight-bit microprocessor as it did in 1970. In 1970, raw materials were actually a significant part of computer prices.

As I said in my response to timhau, cars today use less steel and more aluminum/plastics in manufacturing, so while the amount may be at or near the same, the materials themselves are not. Also, cars are smaller, though they may weigh the same or near the same.

 

[IchabodPlain]

Also, this is an interesting link:

http://www.nhtsa.dot.gov/Cars/rules/regrev/evaluate/809834.html

The gist being that Federal Motor Vehicle Safety Standards have added about $720 to the cost of a car and more than 100 pounds to automobiles from 1968 to 2001.

ETA: If this is an accurate picture for how much government mandates cost consumers, then they have added about 4-5% to the cost of a new car, up from less than 1% in 1968 for safety mandates. That means they make up about $700 of the $6,000 of the change in price (or about 12%), and thus, do not go a long way towards explaining the cost increases of cars from then until now.

 

[Eddie Dane]

What we're paying for is reliability. We pay for cars that run for a hundred thousand miles without needing more than regular oil changes. If we get one that won't, we feel we've got a lemon.

A

...Or a Toyota.

Ching-boom! I'll be here all week. Try the veal.

Sorry, couldn't resist.
Toyota recently dropped of my shortlist of favorite, most reliable brands. I'm still working through that.

 

[El Greco]

I'm astonished at how many cars still have a clock that can't be programmed to autodetect DST settings. And at how much stock sound systems suck (and if they don't suck they're ridiculously expensive compared to aftermarket solutions - which are much better anyway). And GPS is almost aways an extra. We're talking about cheap stuff that would cost probably no more than $50 per car to be implemented.

 

[IchabodPlain]

Could it be that the luxury car market has increased, skewing the mean from the more functional days of the sixties

Snap! This is actually a very good point. The best selling model car I can find from 1968 is the Chevy family of full-size cars (Bel Air, Biscayne, and Impala). The average prices of these cars were about $3,271 (or about $20,030). Compare that to the 2008 best-selling car, the Camry, which had an MSRP of $18,570. Both of these numbers are adjusted in 2008 dollars.

So, I do think there is a case to be made that the increase of the luxury market has skewed the mean, or at least that some factor is skewing the mean of one or both of my original figures.

 

[The Central Scrutinizer]

I understand that cars today have more features than their 1968 counterparts -- airbags, cd players, crumple zones, etc.. some of which mandated by governments, some of which because of consumer preferences. Still, it seems odd that car prices have not, on the whole, gone down, but actually (if my links are correct) went up by more than 25%. So, what is it? Why have car prices gone up over the last forty years?

You answered your own question.

Find a 1968 car. Open the hood. What do you see? A big block of iron. That's the engine.

Find a 2009 car. Open the hood. What do you see? No engine? Well, it's in there somewhere, under all the crap piled on top of it - fuel injection, turbochargers, environmental stuff, computers, etc... There's a lot of your extra costs.

Add in lots of things that are now standard that used to be optional: Power steering, power brakes, power windows, air conditioning, bucket seats, 6 channel surround sound, etc...