Why aren't cars less expensive?

[IchabodPlain]

Looking through some numbers, I noticed that cars have not gone down in value relative to consumers income, rather, cars today cost more as a percentage of total household income than they did in 1968. Why are cars more expensive today when trade agreements, labor costs, technology, etc.. would seem to push the cost of cars down from where they were forty years ago? Maybe one (or more) of my links are inaccurate?

Average new car price in 1968

Average new car price in 2006

Average household income 1968 and 2006

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?

 

[GreenLines]

Because cars are more valuable now compared to then.

 

[Fnord]

The cost of pensions and other benefits paid to the workers that make them, is my first guess. These alone can add from $2000 to $5000 to the vehicle's cost. According to this CNNMoney.com article:

Cost issues

A big reason is the cost of labor. As analyzed by Harbour-Felax ... Health care is the biggest chunk. GM, for instance, spends $1,635 per vehicle on health care for active and retired workers in the U.S. ... Other labor costs add to the bill. Contract issues like work rules, line relief and holiday pay amount to $630 per vehicle ... And paying UAW members for not working when plants are shut costs another $350 per vehicle.

That's $2615 U.S. per vehicle, according to CNN.

 

[h.g.Whiz]

Because car makers keep offering a wide variety of features and models (which keep changing as well)to suit the taste of consumers.

Henry Ford once said "you can get one (Model T) in any color you want as long as you want black".They were plain looking but on the hand they were durable and cheap.

General Motors set the trend for custom features, which eventually forced Ford to start offering similar features as well.

 

[kevinquinnyo]

I don't think it's that simple.

It's not a commodity, it's a machine. The machines nowadays are so much better. So it's apples and oranges.


That said, there are a bunch of different ways to calculate the relative worth of a dollar at one time vs another time. And it all depends on what you're comparing.

http://www.measuringworth.com/uscompare/

 

[Leif Roar]

I think that for houses and cars there's also a variant of Parkinson's law at play, in that "cost expands so as to fill the money available for its purchase."

People tend to buy not the cheapest car of a given quality but instead the best car for a given price. So while the cars of 1960 could be made cheaper in relative terms today, people wouldn't be interested in buying them. They'd rather spend the same amount of money (in relative terms) and get more car for them than buy similar amount of car for less money.

 

[The True Scotsman]

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.

 

[kevinquinnyo]

if you use the GDP per capita method, to find out how "affordable" the model t was in 1906, priced at $850, that would be like spending about $115,000 today.

 

[LTC8K6]

Mandated items contribute as well. In the US, stability control is now mandated, which adds all sorts of things to each car.

This is why tire pressure monitoring is now common. You need properly inflated tires for the stability control to work properly.

Airbags were mandated, which added expense and complexity. Then the mandate was changed to accomodate small people, which added more expense and complexity.

Earlier you had seatbelts, and then emissions controls.

Emission controls get tighter and tighter.

Crash testing gets harder and harder to pass.

I think government mandated equipment plays a big role.

 

[LTC8K6]

In Europe, you have pedestrian protection requirements, which have added a lot to the cost of a car.

Nissan had to add a pop up hood to the GT-R. The hood actually pops up if the vehicle hits something. This is accomplished with fast acting one shot rams that lift the hood a few inches very quickly.

The requirement is for a certain amount of space between the hood and the engine, so that the hood will crush downward a few inches when the unfortunate person lands on it...

Don't have that space? Then you need to make the hood rise up on impact, to create the space.

 

[LTC8K6]

http://www.gtr.co.uk/forum/127250-accident-dont-do-what-i-did.html

Minor bump sets off GT-R's pedestrian protection system.

Mercedes has a simpler and resettable system. Still though, these things add a lot to the costs, especially when you consider the design and engineering of them.

 

[Andrew Wiggin]

One of the big things that adds a lot of cost is a century of working out the bugs. 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. I have some old service manuals on ye olde bookshelf of old books, and the amount of maintainance these beasts took was truly daunting. When was the last time you had to pull the heads and scrape the carbon off your pistons? When was the last time you had to rerivet your brake bands? How about shimming the clutch facing? They didn't alway self-adjust... The transmission took a lot of tinkering and a lot of skill to even shift, and forget about anything hands off, or even synchromeshed. Don't even get into the subject of tires: no one does their own tire maintance any more, and it's a good way to take a hand off if you do.

Anyone wealthy hired someone to do all these things, so that they could just ride around, but if you couldn't afford to hire a full time driver/mechanic, you did them yourself. If you didn't do them, you'd end up stranded on the side of the road.

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

 

[gumboot]

I agree pretty much with everyone else. You really can't compare a 60s motor car with a modern motor car. Aside from the enormous difference in terms of "features" (and some of these "features" are pretty fundamental differences, we're not only talking automatic interior lights and CD players), even the basic elements of the motorcar, which exist in both instances, are enormously different.

One might as well say "how come a 1950s fighter plane costs less than a 1990s fighter plane?".

 

[IchabodPlain]

I don't think it's that simple.

It's not a commodity, it's a machine. The machines nowadays are so much better. So it's apples and oranges.

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.

I'm not finding your argument convincing.

 

[IchabodPlain]

The cost of pensions and other benefits paid to the workers that make them, is my first guess. These alone can add from $2000 to $5000 to the vehicle's cost. According to this CNNMoney.com article:



That's $2615 U.S. per vehicle, according to CNN.

It is probably part of the cost, but you need to show me what those benefits/pension-type costs were in 1968 to make that claim.

 

[IchabodPlain]

One of the big things that adds a lot of cost is a century of working out the bugs. 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. I have some old service manuals on ye olde bookshelf of old books, and the amount of maintainance these beasts took was truly daunting. When was the last time you had to pull the heads and scrape the carbon off your pistons? When was the last time you had to rerivet your brake bands? How about shimming the clutch facing? They didn't alway self-adjust... The transmission took a lot of tinkering and a lot of skill to even shift, and forget about anything hands off, or even synchromeshed. Don't even get into the subject of tires: no one does their own tire maintance any more, and it's a good way to take a hand off if you do.

Anyone wealthy hired someone to do all these things, so that they could just ride around, but if you couldn't afford to hire a full time driver/mechanic, you did them yourself. If you didn't do them, you'd end up stranded on the side of the road.

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

Would all of your above examples be relevant maintenance issues in 1968? I am not a car expert, so forgive my ignorance.

 

[ponderingturtle]

Looking through some numbers, I noticed that cars have not gone down in value relative to consumers income, rather, cars today cost more as a percentage of total household income than they did in 1968. Why are cars more expensive today when trade agreements, labor costs, technology, etc.. would seem to push the cost of cars down from where they were forty years ago? Maybe one (or more) of my links are inaccurate?

Average new car price in 1968

Average new car price in 2006

Average household income 1968 and 2006

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?

Hey in china GM sells a minivan for about $5000. Of course they wouldn't pass a US safety inspection, americans wouldn't like the 3 cylinder engine, as it has about a quarter the horse power of an american vehicle. But it does get 40mpg. It is the Wuling Sunshine.


Of course when you start adding in all the things like airbags, bigger engine and such that Americans would want, you raise the price.

 

[IchabodPlain]

Mandated items contribute as well. In the US, stability control is now mandated, which adds all sorts of things to each car.

This is why tire pressure monitoring is now common. You need properly inflated tires for the stability control to work properly.

Airbags were mandated, which added expense and complexity. Then the mandate was changed to accomodate small people, which added more expense and complexity.

Earlier you had seatbelts, and then emissions controls.

Emission controls get tighter and tighter.

Crash testing gets harder and harder to pass.

I think government mandated equipment plays a big role.

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.

 

[drkitten]

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.

They're very special cases, due to an extremely unusual circumstance called Moore's Law.

You won't find anything that isn't primarily electronic equipment that has experienced that kind of a price drop.

 

[ponderingturtle]

They're very special cases, due to an extremely unusual circumstance called Moore's Law.

You won't find anything that isn't primarily electronic equipment that has experienced that kind of a price drop.

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