Carpe Diem

5 charts showing there’s never been a better time for average Americans to own, operate a car; the ‘good old days’ are now

Image Credit: Shutterstock

Image Credit: Shutterstock

The five charts below provide evidence that there’s never been a better time for a typical American to own and operate a car — they last longer than ever before, they’re more fuel efficient than ever before, our highways are safer than ever before, financing costs for cars are lower than ever before, and the cost of purchasing a new car has fallen by more than 50% since 1995 after adjusting for inflation and quality improvements.

Here are the five car charts:

cars11. The first chart above shows that the average age of cars on the road in the US reached an all-time high this year of 11.4 years, which is a full 3 years longer than the average age of cars in 1995. Reason? The average age of cars today is higher because vehicles last so much longer today compared to past models, thanks to the significant improvements in quality, durability, and reliability that have happened consistently year after year.

“People are keeping their cars… because cars are just lasting longer,” said Mark Seng, an R. L. Polk and Co. vice-president in this Detroit New article “Quality helps Americans keep old cars longer, data firm says.”

cars2

2. The second chart above shows that cars today are not only lasting longer than ever, they’re more fuel efficient than ever before. Ward’s Auto is reporting this week that the average fuel economy for US light vehicles in July reached 24.5 mpg, establishing a new all-time record high for fuel efficiency. Compared to 1975, cars and trucks today are almost twice as fuel efficient on average (13.1 mpg vs. 24.5 mpg, data here). In just the last six years, average fuel economy has increased by 19%, from 20.6 mpg in 2007 to 24.5 mpg this year. Increased fuel economy translates into lower fuel costs for consumers.

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3. Americans traveling by car are also benefiting from the fact that US highways are getting safer all the time, as the third chart above illustrates. Motor vehicle fatalities in the US, adjusted per 100 million vehicle miles traveled (VMT), have consistently declined over time, according to data complied by the National Highway Traffic Safety Administration (available here). In 1950, there were 7.24 highway fatalities per 100 million VMT, and last year there were only 1.16 fatalities adjusted for travel miles, an 84% reduction in fatalities in the last 63 years. Although it’s not shown here on the graph above, the 1950 figure of 7.24 deaths was about one-third the level of more than 24 highway deaths per 100 million VMT in 1921. And even over the last several decades, the adjusted number of highway fatalities has been reduced by 50%, from 2.08 deaths in 1990 to 1.16 deaths this year.

(Note: the graph shows that the significant increase in cell phone usage over the last 20 years has been accompanied by a decrease, not an increase, in traffic fatalities adjusted for travel miles. This recently published research paper, using a more rigorous statistical analysis, finds no empirical evidence that increased cell phone usage leads to an increase in accidents.)

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4. Financing a new car has never been cheaper, according to data from the Federal Reserve on the 48-month loan rate for new autos, see fourth chart above. In 1981, when the car loan rate peaked at 16.8%, the monthly payments on a $20,000 car loan would have been $575. At today’s rate of 4.1%, monthly payments on a $20,000 loan would be only $452. Over the four years of financing, a 4.1% car loan rate today would save a borrower more than $5,900 compared to the 16.8% rate in 1981.

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5. Here’s maybe the most amazing car chart of all — the fifth chart above shows the monthly Consumer Price Index (CPI) for all items vs. the CPI for New Cars vs. an index of the Average Hourly Wage for Production and Nonsupervisory Employees in the Private Sector. All three variables have been adjusted to equal an index value of 100 in January 1995.

Since 1995, wages have increased more than 75%, and prices for all consumer goods and services have increased by almost 55% on average. In contrast, the CPI for new vehicles has remained almost flat for the last two decades and has increased only 4.4%. That means that after adjusting for inflation and quality improvements, the price of new cars has fallen by more than 50% since 1995! And compared to the increase in wages, the price of new cars has fallen by more than 70%!

Bottom Line: We hear all the time about the struggles of a stagnating middle class in America trying to make ends meet on stagnant wages, declining household incomes, diminished opportunities for upward mobility, etc. But when it comes to owning and operating a vehicle, Americans, including the middle class and low-income groups, have never had it so good. The cars we buy today last longer than ever before, they’re more fuel efficient than ever before, our highways are safer than ever before, financing costs for cars are lower than ever before, and the real cost of purchasing a new car has fallen by about 50% since 1995 and by more than 70% compared to average wages.

Today’s motor vehicles that are more affordable than ever before are part of the “miracle of manufacturing,” which continues to deliver cheaper and better goods to American consumers year after year, which translates into a higher standard of living for all Americans, and especially for lower and middle-income households. If we wanted to identify a “golden era” of prosperity for middle-class America based on the affordability of the vehicles that are owned by 95% of US households, today’s consumers are many times better off than the consumers of any past decade, including the 1950s that Paul Krugman and others wax so nostalgic about. The significant reduction in the cost of purchasing and operating an automobile for average American households is one reason that the “good old days” are now — and not some previous decade! We’re now in the “golden era” of automobile affordability, value, durability, reliability, and safety.

20 thoughts on “5 charts showing there’s never been a better time for average Americans to own, operate a car; the ‘good old days’ are now

  1. I remember my dad trading in for a new car before the old one got 50,000 miles, because at 50k they began to “fall apart”.

  2. that CPI for new cars is a little tricky.

    it’s adjusted for presumed quality improvements.

    while cars today are, in general, better than the ones from 10 or 20 years ago, the amount of that adjustment is completely subjective.

    in 1995, a honda accord started at $13,200.

    today the cheapest one is $21,700.

    that’s a lot more than 4% increase in price.

    the base ford mustang coupe was also $13,200.

    that car is now $21k.

    a porsche 911 was $52.7k

    that car is not $84.3k.

    the list goes on and on.

    in nominal, unadjusted dollars, these prices are up only slightly less than wages and cars come more a la carte now. you’ll wind up paying more over base price for options.

    • that chart also shows real average wages up less than one percent a year…most of that “average” went to the top quintile who can still afford new cars…

      myself, im looking at two 2001 vintage models under $3500

    • Not only that but if we look at repairs today the costs tend to be much higher. My first vehicle was a VW Jetta. While I never hit anyone I had two impacts where someone (in both cases it was kids) rear ended the vehicle. There was not a problem in either case. They apologized, I saw that there was no damage and we went our way. My most recent vehicle was hit by an empty runaway shopping cart. The rear bumper is scratched and if I want to paint it properly the cost will come out to around $150. If I were hit by another vehicle at a similar speed the replacement for the plastic bumper would come out to more than $1,000. In the old days it was easy to save a few bucks by doing your own minor repairs. That is much more difficult today because of all the electronics involved and the much more cluttered engine compartment.

    • I can give you a good example. I don’t buy cars often. I replaced a 1987 vw fox $7500 with a 2001 ford focus hatch back. The cars are of a similar class for the period. Just including inflation the two rates are the same. But ff
      Is compact not sub. Has thicker windows and sound barriers. Has 15″ wheels similar fuel economy but the engine has 50% more torque and horsepower. It also has air bags – automatically turns off the cab lights and radio after an hour without the engine running – I am sure there is more. But I basically purchased much more car for the same Price.

  3. it would be interesting to add a chart of horsepower per liter as well.

    that has absolutely exploded in recent years.

    it used to be that 100 hp/l was the absolute limit and few thought you could get much past it.

    some of the cars today are getting damn close to 200 and are still reliable as can be. there is zero question that engines are making huge leaps. there were maybe 3 or 4 production cars in the world pre 2000 (and these were serious exotics like the mclaren f1) with more horsepower than my suv.

    that said, is it just me or is the current styling of most cars pretty awful?

    the new bmw’s look like buicks.

    the porsche panamera makes me want to throw up in my mouth.

    there are a few pretty cars in the over $150k set, but even the 458 is nothing like the gorgeous 430 but i am just not seeing a whole lot i think is pretty.

  4. The best is yet to come :

    1) Self-driving cars
    2) Nanomaterials that are lighter but stronger, than current body metals.
    3) Electrical Vehicles reaching near-parity price with gasoline vehicles.
    4) 3D-printing of replacement parts, slashing costs.

    • Ink for your inkjet printer costs you $100 so let us be a bit more realistic about 3D-printing of replacement parts. Do you really think that you will ever be able to print a piston, a spark plug, a bumper, or a starter motor? And the electric vehicle song and dance has been with us for a century now and we are still waiting.

      • In case you were not aware, 3D Printers are now available for consumers, and filament tends to cost $10/pound. Industrial-grade printers cost more, but it is still very inexpensive to print such parts.

        It is not 2006, muchacho….

        • In case you were not aware, 3D Printers are now available for consumers, and filament tends to cost $10/pound. Industrial-grade printers cost more, but it is still very inexpensive to print such parts.

          It is not 2006, muchacho….

          $10 a pound for what? Are you telling me that you can print a camshaft or piston? How about just a simple wire? From what I see most of these printers are suitable to make plastic models that would help design teams or toys, plastic jewelry, etc.

  5. I suppose that I should complain about the loan rate being included, as it is driven by economic forces of questionable benefit to the broader economy. This doesn’t directly contradict anything that Professor Perry says, but it is still relevant to the spirit of the post.

    Actually, the issue strikes me as being akin to the current cost of housing: Buyers are certainly pleased, but buyers are often sellers simultaneously. I don’t know why we shouldn’t think of auto loans (interest rates) in a similar way. I will avoid getting into a serious discussion of Wicksell and friends, but I must say that it seems better to have the “right” interest rate, and that might not be what we have now…

    For what it’s worth, I believe in applying similar standards to a glorification of Krugman’s good ol’ days: Much of what made those days so good for white high-school educated males also made the world a worse place for just about everyone else.

  6. Er, I hate to mention it, but….a lot of regulations went into the lower vehicular death rate…seat belts, air bags….a more intrusive government effort at getting drunk drivers off the road….

    • Er, I hate to mention it, but….a lot of regulations went into the lower vehicular death rate…seat belts, air bags….a more intrusive government effort at getting drunk drivers off the road….

      Look at the chart again and try to figure out when the regulations were put into place. There was no change in the trend. That began long before the government got into the act.

    • Er, I hate to mention it, Benjamin, but most of the improvements in car safety the past few decades were the result of free market competition, not regulation. Those innovations would include:

      - collapsible steering wheels;
      - disc brakes and power assist braking;
      - electronic stability and traction control systems;
      - anti-lock braking;
      - side impact protection beams;
      - energy-absorbing crumple zone design;
      - backup cameras and reverse backup sensors.

      A few automobile manufacturers led the way in developing safer cars, and demand for those innovations forced all manufacturers to follow the lead.

  7. And an analysis of cost of consumer goods would show that Walmart by itself has been the biggest boon to the standard of living for the average person in history. They have made everything more accessible. Their evolution and cost management strategies force all other retailers to improve as well!

  8. I should like to point out that perhaps, just perhaps, the reason people are holding onto their vehicles longer is because they cannot afford a new one, because they are a) tapped out on credit b) unable to access credit due to job loss/mortgage default/bankruptcy c) new vehicles cost substantially more than used, and far more to insure, especially if one is young d) the uncertainty of obamacare for those who are employed full time still e) the craziness of credit scoring means that if you have previously had a mortgage/car loan and paid it off, sworn off credit cards, and only use debit cards now, your credit rating is trashed. Good luck buying a toaster on credit.

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