@“the same mountainbike”, you used economy car as an example, but your first reference said that the average cost of all automobiles was 9.5% of annual income in the early 1970s. If the average cost of all automobiles today is the same, then average annual income would have to be about $220,000 to match your average cost of $23,000. Since the average income is about $50,000, there is clearly big inflation of car cost with respect to income. Since the question has been expanded to all automobiles, I still think we are comparing different product mixes. There were relatively few luxury cars in the 1970s, and I think that is a lot of the cost inflation. Even compact cars offer luxury versions today. That’s my main point.
Pick at the details until you obfuscate the point if you’d like, jt, but the fact is that new cars today cost far more as a percentage of average household income than they did in 1972.
By the way, we had plenty of luxury cars in the 1970s. Ever heard of Cadillac? Or Lincoln? Or Chrysler New Yorker? I’m comparing economy cars of the '70s with economy cars of today.
You did draw one accurate conclusion, however. For the portion of household income today needed to buy a new economy car to be the same as the portion of household income in '72 necessary to buy an economy car, a family would have to be bringing in upwards of $200,000. Thank you for proving my point.
Prices in general have gone up compared to the average income. Not just cars. The buying power of the middle class and lower class has been eroded since the 80’s. Prices of goods and services in many sectors have gone up…wages for most haven’t kept pace…not even close.
SOME things…others have plummeted (electronics). Also, all this “world is flat” economy means you can get your dubious-quality doo-dads at a small fraction of prices days ago. (Heck, $30 sneakers at W/M?!)
I think of how it was the “height of excess” when bored rock stars would chuck TVs off hotel balconies, just to watch them explode. Today, you could probably get them for free! (Gives me an idea for a 70s-themed party…)
Cars actually aren’t more expensive. In 1980 an Accord sedan was $6,500. Adjusted for inflation, that’s about $21,000, same as today, and today’s car is MUCH better equipped and MUCH safer.
There are a lot more luxury cars than there used to be, and that changes the issue.
These luxury brands either didn’t exist in the 1970s:
Acura
Genesis
Infiniti
Lexus
Tesla
These brands did not offer luxury models but do now:
Honda
Jeep
Land Rover
Mazda
Nissan (Datsun)
Toyota
Volkswagen
Volvo
Just about al brands offer more luxury selections than they used to:
Chevrolet
Dodge
Ford
Audi
@texases I have to agree. In 1987 my brother bought an Accord with air and he paid $17500. Today, a Civic is not only larger but even in its basic form has more equipment and better quality.
Domestic car sales were crashing in the late 70s and early 80s while Japanese imports were rising as I recall. At that time Honda dealer could add outrageous “dealer options” to the sticker price while offering scrap yard value for late model American V8s at trade in. I was living in the Bay area when the even-odd tag number effort was made to reduce bloodshed at the gas pumps and people were paying top dollar for Datsun ‘Super Bs’ while parking their Trans-Maros on the curb FSBO for BEST OFFER. Americans were convinced that the world’s oil wells would be sucking air soon.
American consumers seem to rush in herd fashion from grandiose self indulgence to desperate financial austerity. And a few smart people are able to cash in on US at both extremes and the interims between.
@Docnick - you’re right, the Civic is the modern equal of the 1980 Accord, and it’s around $18,600. So cars are cheaper today, inflation adjusted!
Correction: ONE car (depending on how you define it) is cheaper today. As a whole, no. And besides, by any right, they should be MUCH cheaper! I mean, with all the automating, union-busting, and outsourcing to low-wage nations, we ought to at least get the ancillary benefit of cheap goods!
@meanjoe As mentioned before, Americans are more prosperous as before. The average new house is now 2400 square feet. In the early postwar year 1200 sq. ft. was the norm. Levvittown would be a joke if built today.
THEREFORE, Americans are buying more powerful and better equipped cars. The same is true in Europe. The original VW Golf was tiny compared with today’s models.
I don’t understand what point you are trying to make. There are cheap cars built in the USA (Lordstown) as well as in other countries with lower wages.
Neither Trump not Sanders seem to (or won’t) understand international business and manufacturing economics. Don’t listen to either one; it’s all election hot air.
- The “set of all Americans who buy new houses and cars” is NOT “the set of all Americans.” Just because the first group is becoming wealthier, it does not follow that everybody else is, too.
- “What I mean” is obvious: with efficiency gains in automated/computerized workplaces, “world is flat” flow of labor and capital between nations, and the decreased wages and benefits for blue-collar workers, saying “prices really haven’t risen” is insufficient evidence that safety/emissions regs haven’t jacked up prices. By all rights, cars should be MUCH cheaper, like all our other semi-durable goods. Prcie stagnation, in the face of lowered prices of other manufactured goods, is strong evidence of the hidden costs of regulations.
- As for the candidates, they’re entertaining, and let’s leave it at that.
The candidates is a whole different subject, not related to cars.
I stand by my conclusion. As a percentage of average household income, cars are a lot more expensive today, by a factor of two to 2-1/2 times, than they were in the early '70s. I’ve posted the numbers and their sources. You can find ways to manipulate the data if you’d like, but it is what it is.
In 1970 one U.S. dollar would get you 360 yen. Currently the exchange rate is 110 yen/$ and that is up considerably from a year ago. And in 1980 home loans were made at 12% and cars financed for 18%. It seems extremely difficult to pull the relative cost of an automobile out of the quagmire to make a meaningful comparison.
The current state of easy money financing is a temporary situation that we will likely find ourselves regretting in the not so distant future. Cheap automobiles have been the MVP of our recent economic recovery(?). But what will our fearless leaders on Wall St do when they finally recognize that the market is oversold, the assembly lines are closing and the manufacturers, their dealers and customers are in debt up to their ears as interest rates rise? Does STAGFLATION ring any bells?
@meanjoe Less well off Americans have never bought new cars; they buy used cars. Used car sales are about twice the number of new car sales.
My first job out of college was $5200 per year, a stripped Chevy or Ford was about $2400 then and a Beetle $1900.
Kids graduating now start at much higher salaries in terns of buying power. My son started at $50,000 and could buy a stripped econobox for $12,000 max, but it still had many more gadgets and better quality than those 60s cars.
You are probably referring to the jacked up wages and benefits the UAW workers got before their companies crashed. This was followed by more realistic wage levels.
Public servants and teachers have been the big winner; their contacts never get scaled back and teachers teaching grade 3 students often earn $80,000 per year based on seniority and experience. Those teachers could barely afford new cars in the 60s. Now they buy loaded SUVs.
The way the US auto industry is organized, we will likely never have really “cheap” cars made here; that’s a function of good management and unions who have the same focus as management.
In Germany auto workers enjoy the world’s highest wages, but sit on the board and jointly focus on efficiency Likewise in japan where wages have risen sharply over the years.
Well when gasoline and diesel hit $4 plus a gallon again ,you will see the more economical models become harder to obtain .Its basically the same thing that occurs before a predicted major weather event.
@Docnick, I think you are exaggerating the teacher’s salary. I live in a high cost area with one of the highest rated school systems in America. Very few teachers, if any, make that much even here.
It also appears that you think poorly of early childhood educators. I guess that is because you don’t know what they do. It’s actually a difficult job. Teachers have to keep 20 children in line for 7 hours a day. They do this by keeping them occupied with work a productive play. A lot of times the activities involve both. Teaching method is very important with young children and early childhood teachers spend a great deal of time learning and practicing before they are turned loose with the children. Teachers continually evaluate their students for aptitude and what might drive poor performance. It could be that they have a medical condition like ADHD or are on the autism spectrum. Teachers have to recognize that and call on counsellors to do a more in depth evaluation. All this goes on without the child knowing. Problems might also be due to home life issues. And teachers have to know how to determine if these issues exist and inform the Principal if they have concerns. This may seem easy to you, but not to me. Oh, they have to deal with parents that have the same misinformed attitude that you do and tell them how their child is doing even if there are problems the parents should know about.
I agree with @jtsanders… Not all school districts pay well. Here in NH…cost of living is very high…yet school salaries are extremely low. Starting salary is so low you either have a spouse with a good salary, or you live at home with your parents.
Few public servants and/or teachers where I live are making that kind of base salary. Profs do, however, have the capability, because under many systems their mandated required credits are low enough to allow those so motivated to teach extra credits at adjunct rates… and that boosts their total.
Cops have a particularly corrupt system. They get paid extra (at their overtime rate) for “details”, the extra gets added to the pension calculation, and the pensions in NH are based on the highest three years of earnings. Cops preparing to retire take all the details they can get, boost their income to far, far more than their base, and retire at higher pensions than their base. And the laws in NH require many construction projects to have cops on site in situations where other states use automated temporary stoplight systems.
I would not mind a bit if the cops earned extra money on details… but it should not IMHO be calculated into their pensions. They should not IMHO be paid for the rest of their lives for extra details they took on their last three years of service.
@jtsanders I am fully aware what grade school teachers do. My ex next door neighbor and a good friend of my wife were both grade 3 teachers. It’s not a job I would want, but then neither would want my job of oil consulting I the jungles of Colombia.
An other friend of my wife made over $110,000 as a small public school principal and retired with 80% of his salary and full benefits at age 60. His wife is a department head and is retiring with the same benefits.
I’m not singling out teachers, although here they make a comfortable living; it’s all the other public servants as well. California almost went bankrupt because of excessive public servants demands and no cost control. Unlike industry, government seldom lays off or fires staff. The state of Wisconsin took the bull by the horns, I believe and made the needed changes.
Our city has started to contract out many services since even the lowest laborer makes $25 per hour with a very rich pension plan, long holidays, and complete medical services. And cities find it almost impossible to get rid of unneeded employees.