The chart above shows the CPI for all items (blue line, data here) and the CPI for new vehicles (red line, data here), with both series set to equal 100 in the year 1989. Over the last 23 years, consumer prices have increased by an average of 85.3% (and by 2.71% per year); in contrast, the CPI for new vehicles (with adjustments for quality) has increased by only 21% (and by only 0.83% per year), and has been basically flat for the last 17 years. Amazingly, the CPI for new vehicles has fallen by 64.3% since 1989 in real terms, and on an annual basis by 1.9% per year!
What inspired the chart above was the 2013 U.S. Vehicle Dependability Study that was released last week by J.D. Powers and Associates, which reported that vehicle dependability reached an all-time record high this year. Here’s an excerpt from the press release:
“The long-term dependability of three-year-old models has improved year-over-year, according to the J.D. Power and Associates 2013 U.S. Vehicle Dependability Study. The study, now in its 24th year, measures problems experienced during the past 12 months by original owners of three-year-old vehicles (those that were introduced for the 2010 model year). Overall dependability is determined by the number of problems experienced per 100 vehicles (PP100), with a lower score reflecting higher quality.
“In 2013, overall vehicle dependability averages 126 PP100–a five percent improvement from the 2012 average of 132 PP100–and is the lowest problem count since the inception of the study in 1989.”
In my Wall Street Journal editorial in January with Don Boudreaux, we argued that despite the repeated complaints about the stagnating middle class, the affordability of most of “life’s basics” (food, clothing, cars, and household furnishings like appliances) for middle-class Americans is actually the highest in history. The falling real cost of new vehicles makes them increasingly affordable for middle-class Americans, and their dependability is at an all-time high, which reduces the cost of vehicle maintenance. Most cars now last for 200,000 miles or more, which was unheard for cars built even as recently as the 1980s.
Bottom Line: When it comes to the affordability, reliability and quality of new vehicles, Americans (including low and middle-income groups) have never had it better than today. Today’s cars and trucks are another example of how middle-class Americans today have more buying power than ever before, and are far better off than their parents or grandparents.