Reverse Sticker Shock? No Inflation for New Vehicles for 22 Years, Says Consumer Price Index, as Taurus Prices Soared 55%

But then there’s the “average transaction price.”

A new 2019 Ford Taurus, with a sticker price “starting at” $27,800, is a better car in myriad ways than a new 1996 Taurus was at the time, with a sticker price “starting at” $17,995: quality, equipment, performance, comfort, safety, etc. In other words, the model has gotten a lot better over the 22 years, and the price has surged by 55%. So far so good. And this is typical for all models that have existed this long.

But today, the Bureau of Labor Statistics, when it released its Consumer Price Index (CPI), explained that prices of new vehicles, per its CPI for new vehicles, showed 0% inflation in January compared to January a year ago, and that in fact, confusingly, prices have been essentially flat over the past 22 years:

Note the 12-year time span of declining new-vehicle prices between the end of 1996 and the end of 2008. While real car buyers were getting treated at nearby hospitals for “sticker shock” over those years, the CPI for new vehicles miraculously declined.

There’s another period of such price declines, according to CPI: From January 2017 through January 2019, CPI for new vehicles declined by 1.2%.

Alas, over the same two years, from January 2017 through January 2019, the “average transaction price” – a common industry metric that tracks the price at which the dealer sells the new vehicle to the consumer after all haggling – rose 6.2%.

The chart below shows the average transaction price in January of 2019, 2018, and 2017 per Kelley Blue Book estimates; for the prior years, it shows the average transaction price per Statista. Also note that in the 12 years since 2007, as CPI new vehicles has ticked up 8%, the average transaction price has surged 29%:

The reason for the discrepancy – 22 years of essentially 0% inflation for new vehicles and surging new vehicle prices in real life – are some adjustments that conceptually make sense to some extent but practically lead to these absurd results.

The CPI for new vehicles currently weights 3.7% in the basket of all goods and services in the overall CPI for urban consumers (CPI-U). It’s one of the reasons why inflation as measured by CPI remains low, even as consumers are shelling out more and more money to buy what they need.

These adjustments that bring down CPI include “hedonic quality adjustments.” They’re not a secret. The Bureau of Labor Statistics explains how they’re derived for new vehicles:

Quality adjustments are based on resource cost provided by manufacturers in categories such as: reliability, durability, safety, fuel economy, maneuverability, speed, acceleration/deceleration, carrying capacity, and comfort or convenience. Adjustments are also made when equipment is added or deleted from the tracked model.

Hedonic quality adjustments are also applied to other items, such as consumer electronics. Conceptually, they make sense. The smartphone today is an incomparably more capable device than a cellphone was in 1996.

And I get that. There is just no comparison between a 1996 Taurus when it was new, and a 2019 Taurus. At every level, today’s vehicle is far superior, and there is a price attached to these improvements. But I can no longer buy a new 1996 Taurus for $17,995. That choice doesn’t exist.

So the BLS prices these improvements and converts them into adjustments and applies them to CPI, product by product. But there is also a lot of leeway to do what consumers can feel under their skin is being done, particularly when they get sticker shock: That these adjustments are carried purposefully just a little too far, every year, year after year, item by item, in tiny increments that are additive and eventually add up.

If core CPI rises 2.2% year-over-year across the US, as it did in January, after 20 years, core inflation would amount to 54%. But if a more accurate representation of inflation should have been 3.2% per year, then after 20 years, inflation amounts to 88%. And eventually, you’re talking about some real money.

Automakers risk losing control over core technologies and face the commodification of cars and trucks. A generational shakeup is coming at the auto industry. My take on the inevitable… THE WOLF STREET REPORT

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  110 comments for “Reverse Sticker Shock? No Inflation for New Vehicles for 22 Years, Says Consumer Price Index, as Taurus Prices Soared 55%

  1. qt
    Feb 14, 2019 at 12:50 am

    No inflation folks…keep moving. Nothing to see here ;-)

    • Nick
      Feb 14, 2019 at 1:29 am

      So, no inflation, no adjustment to pensions, no adjustment to Social Security

      • Javert Chip
        Feb 14, 2019 at 1:56 pm

        Actually, Social Security is adjusted for inflation.

        “…The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs…”

        • Gandalf
          Feb 14, 2019 at 6:48 pm

          The main reason the CPI was changed for the first time in 1983 was to decrease the cost of living adjustments to Social Security, as part of a package of changes to keep Social Security solvent for another 20 years.

          Hedonics was added in the 1990s. This morphed into something called “Constant Elasticity of Substitution” in 2015.

          Translated, this means that the CPI is whatever the Federal government wants it to be.

          Websites have made long the argument that if NO changes had ever been made to the CPI, that the true rate of inflation would have been 5-10% in the US since 1983.

          We do see how crooked the CPI. has gotten in other ways. The three main sectors of the economy with the highest inflation rates- healthcare, education, new home construction, have indeed run 5-10% rates of inflation since 1983. The three sectors combined have inflated so much they now make up 30% of the GDP

        • rhodium
          Feb 15, 2019 at 12:31 pm

          It was sarcasm. What I don’t understand is why they don’t use some kind of weighted baseline product to keep the rate more realistic despite there being a half good argument for hedonic adjustment. There has been tremendous “deflation” in electronics for instance, however I cannot buy an equivalent 1990s tv for only $5 new at the store. This would be a case where the substitution effect contributes to inflation even as hedonic adjustments are contributing to deflation. However, anything that would bias inflation upward they ignore. Social security is only partially adjusted for inflation…

    • Dale
      Feb 14, 2019 at 11:26 am

      Yessir!

      Thanks Wolf. I’ve been bringing this up for a while now in various discussion boards. My comparison cars of preference have been the Camaro and Corvette, since their records go back to the 1960s.

      But even so, the CPI for housing is even more distorted to actual prices.

    • Feb 14, 2019 at 1:53 pm

      stop me if I’m wrong, 2.2% inflation for 23 years (I’m not even compounding) is 50.6 times 18K = 27K which is actually less? In 96 you could have bought a twenty year bond that yielded 5%, and kept the inflation premium yourself?

    • TE
      Feb 14, 2019 at 9:38 pm

      The federal government changed how they calculate inflation in the 1990s. The “hedonic quality adjustments” are a ruse needed to show lower official inflation and justify COLA increases for Social Security to a minimum. Otherwise, Social Security would be completely insolvent much sooner than already projected.

  2. Michael Gorback
    Feb 14, 2019 at 1:04 am

    When I saw the title I immediately knew I was going to see the word “hedonic”. Does anyone else wonder why a term related to pleasure is used in this sense?

    Are the BLS bureaucrats a bunch of hedonistic party animals? Hey baby, wanna go to my place and see my slide rule collection?

    • GuiriCateto
      Feb 14, 2019 at 10:04 am

      “But that’s a micrometer screw gauge my dear”

    • RagnarD
      Feb 14, 2019 at 11:21 am

      The could put leather seats, high end sound systems, all sorts of modern electronics in a base model Honda Accord
      Forcing me to pay for improvements that ultimately have little to do with why I bought the car: to get from A to B reliably, quickly, safely. That is,

      • RepubAnon
        Feb 15, 2019 at 9:27 pm

        Question: if car prices are shown as flat because they have more features than before, why not adjust salaries downward due to greater productivity but no corresponding increase?

  3. Jamie Dimon
    Feb 14, 2019 at 1:21 am

    No worrie$, Uncle Jamie will provide the required fund$ for your new and improved Ford Tauri. You get a slick new ride and Jamie gets more intere$t. Hedonic adjustments for me means a few more lines of coke on my new Gulfstream. Win win!

  4. Iamafan
    Feb 14, 2019 at 1:46 am

    Huh what? I bought 2 new Subarus in this past months and both cost over 36k each. That’s a lot more than I paid in former years. Prices have definitely gone up.

    • OutLookingIn
      Feb 14, 2019 at 3:21 am

      My condolences. (sarc)

      • Iamafan
        Feb 14, 2019 at 8:47 am

        I had to buy a car since one of my sons totalled my outback– icy roads. He didn’t get hurt, luckily. There’s always a potential emergency purchase.

  5. charles
    Feb 14, 2019 at 1:48 am

    Two big issues are missing in this article and they explain why you can’t “buy a 1997 Taurus”
    a) Financing is widely available and really cheap (in 1997 LIBOR was 5 to 6%). Most people by car on credit, so the 55% price surge has been diluted. Consequently, the market for new cheap car didn’t hold because of no demand. Note that it may be a phenomenon specific of the US. In Europe for instance, Dacia is making a killing by essentially selling Renault cars with equipment from 10 years earlier.
    b) cars todays last longer than 20 years ago. There is about 25% increase of average age of cars since 1997, and such indicator does not include cohort effect : JD Powers quantified the annual increase in reliability to 5% per year, which means that the amortising period increases by the same amount every year. Even at a modest 3% a year, compounding that over 22 years practically doubles the time/mileage on which a car should be amortised. It means that the equivalent of a new 1997 Taurus is going to be a second hand 2010 Taurus, while being way cheaper than a new 1997 Taurus because amortisation in market prices is front loaded on the first years.
    Deflation is at work. The only thing that currently saves car manufacturer is the persistence of the growth mindset in consumers and notably the stupendously wasteful development of SUV and trucks, where people in fact only need cars. When the music will stop, it will be painful for the manufacturers because there will be a huge inventory of reliable cars that can be used for a long time. Expect them therefore to become ardent supporters of fuel economy standards, fuel or carbon taxes, or anything that will render the existing fleet of vehicles prematurely obsolete. Of course, when the loss will materialise for vehicle owners, the BLS will not register it, but on the other hand, you may see some yellow vests in the streets.

    • Anders Gronskog
      Feb 14, 2019 at 4:53 am

      “cars todays last longer than 20 years ago. There is about 25% increase of average age of cars since 1997”

      I am no expert on the subject..
      But how have they connected the average age of the car park to increased quality and relaibility?
      For me it might as well reflect the average joes wallet content.
      In general you buy a newer car if you can afford it.
      Seldom has the argument been used that one can buy a slightly older car because they are more reliable compared to a car from 1980.

      On a personal note, I dont feel it is true either. The old Volvos an Mazdas I have had has been much more reliable to carry me from point A to B then todays car. Even thou I much prefer the added comfort, security and status in my later cars.

    • safe as milk
      Feb 14, 2019 at 6:24 am

      @charles “cars todays last longer than 20 years ago. There is about 25% increase of average age of cars since 1997, and such indicator does not include cohort effect : JD Powers quantified the annual increase in reliability to 5% per year, which means that the amortising period increases by the same amount every year.”

      no. there was a great increase in reliability until about the year 2000. since then, cars have not gotten more reliable. the complexity of modern cars makes the cost of fixing an older car not worth it. cvt and 8 to 10 speed transmissions along with awd systems will most likely fail 50k miles before an older style 5 speed automatic with 2wd. i don’t have any statistics to back up my opinion but it just seems obvious to me based on their complexity and from feedback i read from owners on car sites.

      also, jd powers statistics are a joke. they are completely in the pocket of the car industry and they have a long history of spouting utter nonsense.

      • wkevinw
        Feb 14, 2019 at 9:49 am

        Reliability/Long Life of vehicles is now very specific to the type of vehicle. The oldest trade ins are – wait for it- Buicks. The vehicles with the highest mileage still on the road are ones like toyota sedans, honda sedans, American truck-based vehicles (with v8s- mostly small blocks). And – wait for it- Chevy Impalas.

        Luxury cars- (e.g. BMW, Cad, MBenz)- are great for ~100,000mi, then on a “cost-only” basis, it’s questionable whether most of them are worth it. People keep them because they have the money and emotional attachment.

        Low end economy cars- speaks for itself- ~ disposable (properly so).

        Newer cars are “nicer to drive” but more complicated. The “good ones” are a lot better than they were decades ago.

        Note- my newest car is 14 years old (Chev Truck), and my oldest is 33 – a Jeep toy. All are still registered and driven.

        A Toyota or Honda 4 cyl vehicle is a very solid one, as is an American truck with a small block v8. To each their own.

        My family has had their hands on/in vehicles as restorers/mechanics for ~70 years. We know what is in vehicles.

      • RangerOne
        Feb 14, 2019 at 10:30 am

        I am not sure how they measure long term reliability for recent model cars. I have to imagine a lot of it is estimation until said models start hitting the 200k mile mark.

        I agree that it is safe to assume, for now, that these more complex cars will have more issues at higher miles. Causing people to either live with failing features and electronics or ditch them for new cars. New car repairs are getting more and more expensive from what I hear.

        I can at least anectodtoally confirm i was shocked at how much minor body work cost my insurance when I took in a 2013 sedan to fix a parking lot dent.

        • JohnnySacks
          Feb 15, 2019 at 3:07 pm

          I won’t fix a dent under insurance. First, I’m paying $500 deductible, second, now CarFax knows about it so any resale/trade is in the tank regardless of how stupid insignificant the damage was. Better to sell it with the dent and take the same loss as Carfax inflicts and come out ahead on the deductible.
          The perfect car: left pedal stop, right pedal go for 200,000+ miles. Tires, brakes, oil as required. Try to wash and vacuum it once a year, otherwise, meh, so what.

          What I really need is a damn OBDII man in the middle device – a timer loop sends the reset signal to the car CPU to shut the engine light off and the connector reports I’m 100% cool to the DMV inspection machine.

    • KGC
      Feb 14, 2019 at 11:57 am

      “cars todays last longer than 20 years ago.”

      A big part of the reason they do last longer is that consumer wages have not kept up with the price increases of newer vehicles, so people are forced to keep them longer. When you add in the increase in costs to maintain newer vehicles (to include insurance) it’s a losing proposition for many people. I have a 38 year old truck, totally analog and which I can do the large portion of maintenance on. That costs me almost nothing to keep, and it’s actually gaining value. My other two cars are 10 & 14 years old, and again fairly inexpensive to keep. I have no intention of ever buying another new car, when they are fast passing the cost of my first house and are totally incapable of lasting that long or ever becoming profitable in my lifetime.

    • Alistair McLaughlin
      Feb 14, 2019 at 11:57 am

      “Deflation is at work.”

      I take it you’re a Keynesian? I’ve never met a Keynesian who doesn’t believe that deflation is hiding around every corner and under every rock.

    • Les
      Feb 14, 2019 at 2:30 pm

      The average car is driven to about 16 years. There is no data on today’s models lasting longer. Even so, people are spending more on routine oil changes and maintenance since the 1970’s to keep their cars running.

      What the hedonic data misses is the faster depreciation cost and the forced obsolescence in cars, computers, cellphones, TVs, and many other consumer products. People used to own phones for many years. Now, in many cases, they replace them when they change service providers or their batteries die.

  6. N.dog
    Feb 14, 2019 at 3:18 am

    Hi Charles,
    Car parts are very carefully designed for a maximum operational life time and no more – cost, cost, cost, cost and cost are the factors involved here. After this time they begin to fail rapidly.
    So, if you don’t drive your vehicle much then it will last a very long time, if you drive it a lot…it will not.
    Reliability is certainly better during the designed life time (except for software/electronics which are so complex that no one really knows), but the end of life is also much moer exactly defined and hence to be expected.
    Another problem is that you can’t repair them anymore. Too complex.

    • JohnnySacks
      Feb 15, 2019 at 3:14 pm

      Beg to differ – as a New Englander I’ve had to give up on both our low mileage vehicles (we use mass transit for work) because of electrical system issues and creeping corrosion. Ever had a rusty brake line blow out? Mileage has zero to do with that disaster.

      Driving them wears out replaceable components – brakes, tires, suspension. Electrical issues are a world of hurt. Although the prevalence of CVT transmissions and lack of manual transmissions is going to make your claim a lot more valid – CVT transmissions are go-kart level junk.

    • charles
      Feb 16, 2019 at 10:11 pm

      N.dog
      There are really differences between brands in there and it also depends on where one drives the car. Where I live in Singapore, fleets of Hyundai (or Toyota, Kia, even some Renault(!)) for taxi service are used 365 days per year for about 300 km per day for 10 years. We are talking an order of magnitude of 1,000,000 km over the life of the vehicle ! The taxi company, not the drivers, owns the vehicles and maintains them with industrial efficiency ; very different economic model than car rental companies, which rely on residual value and quick turnover of the fleet…

      So I would say that technically, hyper longevity is there. Of course, when maintenance is performed by the same people who sell you new cars, the incentive to achieve it is just not there.

  7. nicko2
    Feb 14, 2019 at 3:33 am

    Car ownership is a relic of the 20th century. As a millenial, I live In a megacity (population over 20 million). There are two major peer-to-peer ride sharing companies (with several other niche competitors). In this booming market, uber has even branched out into public transport on demand. Options like uber-x mean I can get a deluxe vehicle on demand at a fraction of the price of ownership (no insurance, no fuel, no parking, no maintianance). When automated vehicles arrive, costs will be driven down further. The average American spends upward of 20% of their income on a vehicle. Individual Car ownership (outside luxury or vanity vehicles) increasingly makes no sense.

    • ian
      Feb 14, 2019 at 4:03 am

      This is your individual choice, it would not suit many others including me. However the point of the article is highlighting the bullshit in the CPI measurements, in this case cars, but applicable to all items that we, including you, purchase. CPI determines pay rises, pensions and the like which is why most people are “inexplicably” getting poorer and have less money to spend on consumables other than by credit which is going through the roof and will blow up again very soon. So one of the root causes of the predicament most countries are in with low growth and ballooning debt is this CPI bullshit.

      • Dave
        Feb 14, 2019 at 6:33 am

        Ian…… ding ding ding, we have a winner!!!

        There is a video by (now presidential candidate) Elizabeth Warren from the great financial crisis times which deals with exactly what you are saying. She was spot on then as you are spot on now.

    • Jon W
      Feb 14, 2019 at 4:04 am

      I agree. But it’s not only because of improving technology (hourly rentals, uber etc) but because for the last 20 years owning a car has become akin to putting a giant ‘sucker’ sticker on your forehead. Governments, dealerships, repair shops, local councils, towing companies, motorway authorities, traffic enforcement, insurance companies, other road users, all basically see cars as a great way to suck money out of you. It is either in the form of little fines here and there for violating ‘the rules’, surcharges for ‘extras’ you need, above inflation increases in costs everywhere, or an outrageous lump sum at periodic intervals.

      When I first started driving 20 years ago, it was pretty cheap to own a car, and if you repaired it yourself your main concern was putting fuel in it (which was also pretty cheap). In today’s parasitic capitalism, owning assets just makes it is easier for the leeches to attach themselves to your bank account.

      Same applies to housing in many places.

    • Ensign_Nemo
      Feb 14, 2019 at 4:48 am

      There are not that many places in the USA where it makes sense to rely on ride sharing. Only the top 20 or so major cities will always have a ride available at any time that you might need one. In most of rural America, owning a car or truck is still much more sensible.

      There are certain “sunk costs” associated with owning a maintaining a vehicle. After the car is purchased, and the required inspections, registrations, insurance and such are completed, those costs are “sunk”. Then the issue is whether or not the difference between the payment from passengers and marginal costs of operating it (gasoline, depreciation from wear and tear, taxes paid on income) is high enough to make it worth the while of the driver to keep doing this.

      I suspect that once those cars need to be replaced, many drivers will “do the math” and stop driving for ride sharing companies. The depreciation from driving a recent model year car frequently will quickly erode profit margins down to zero.

      If Uber ever does get self-driving cars working, they may find that the capital expenditures involved will make the stock market value them more like a car rental company, rather than a high tech firm. Think “Avis” rather than “Apple”.

      In an economic sense, the drivers of these cars are consuming their capital in order to produce immediate income. They have a capital investment that they can use to make money, but the cost of replacing that investment may very well be more than they are willing to spend.

      It’s not a “relic of the 20th century” to own a beater car to drive long distances to go to work – many rural people do it every day to survive. If they ever stop doing it, then the cities that rely on them to feed city dwellers will become ghost towns.

      By the way, the “Yellow Vest” revolt in France was sparked by rural folks who were angered that increases in fuel taxes to fight “global warming” made it next to impossible for them to drive to work and still feed their families. It’s easy to support taxes on rural people when you live in a city. It’s not so easy to live in a city when the rural people revolt and shut down the highways that trucks use to transport food into your city.

      • char
        Feb 15, 2019 at 11:13 am

        Yellow vest revolt isn’t a revolt of the rural people but of people who live their life in rural towns with a population of between 20k and 100k. Those towns are being hit hard by “Amazon” and “New Energy”.

    • TruckMan
      Feb 14, 2019 at 6:36 am

      Within cities, or even towns where one can walk everywhere, car ownership has indeed not made sense since about 2001, which is when on economic grounds I got rid of mine when I was urban. I would use hire cars suited to specialist needs. However, cars still make sense for families, and trucks still make sense in rural areas – over two thirds of vehicles sold in Canada are trucks. Furthermore, two vehicles makes sense in winter, and only proper SUVs and trucks have the ground clearance. My used truck, in two years, has saved me its cost in saved delivery fees and long distance shipping alone (I do a lot of reno work).

    • JoAnn Leichliter
      Feb 14, 2019 at 6:54 am

      Nicko2, what you are talking about in terms of car ownership by residents in the core of large metropolitan areas has been true for decades. It is not cost or time effective for those folks to own a car. Then there is everyone else, in suburbs and flyover country (and please, please keep on just flying over).

    • Michael Fiorillo
      Feb 14, 2019 at 11:33 am

      An if things proceed according to their business model, the ride “sharing” companies will thank you for helping to destroy mass transit by increasing fares exponentially.

    • California Bob
      Feb 14, 2019 at 1:08 pm

      “Car ownership is a relic of the 20th century. As a millenial, I live In a megacity (population over 20 million). There are two major peer-to-peer ride sharing companies (with several other niche competitors). In this booming market, uber has even branched out into public transport on demand. Options like uber-x mean I can get a deluxe vehicle on demand at a fraction of the price of ownership (no insurance, no fuel, no parking, no maintianance). When automated vehicles arrive, costs will be driven down further. The average American spends upward of 20% of their income on a vehicle. Individual Car ownership (outside luxury or vanity vehicles) increasingly makes no sense.”

      Awesome. Here, have a Participation Trophy.

    • eg
      Feb 16, 2019 at 9:57 am

      Uber’s business model is unsustainable — so enjoy the ride while it lasts …

  8. ian
    Feb 14, 2019 at 3:55 am

    Great article Wolf, explaining one aspect of what we all feel. Could have been summarized to “blatant lies”

  9. Leser
    Feb 14, 2019 at 5:03 am

    And since inflation is evidently well contained, interest rates can stay near zero continuing their important role in the Great Recovery.

  10. ooe
    Feb 14, 2019 at 6:46 am

    MIT has something called the Billion dollar project. if you overlay the CPI vs the Billion dollar project figures, they mirror each other, there is no conspiracy.

  11. TruckMan
    Feb 14, 2019 at 6:48 am

    Hedonic adjustments only make sense when all their base assumptions are true, and there are a lot of assumptions, and they aren’t. Here is just one:
    Reliability increasing has to be compared to the probability and cost of repair. The cost of taking a vehicle to a dealer has skyrocketed, and their ability to fix the problem has decreased. The vehicles are now so complex that the average mechanic cannot find the real cause of complex problems, but they will charge you hours of labor to look, then replace entire modules that don’t need it. Furthermore, the ability of the average Joe to do their own work has massively decreased, which is another hidden cost. Hedonic adjustments need to consider whole ownership costs, and they don’t. This is partly because it’s too difficult, but also because the sole purpose of the adjustments is to bring down CPI, and doing the job properly would increase it.
    The same applies to all Government statistics. That’s why the US currently officially has more jobs than unemployed people, when the reality is that 96 million people aren’t working and the ‘jobs’ either don’t exist or are slave labor.

  12. Feb 14, 2019 at 7:03 am

    Graduated university in 1982. Couldn’t find a job in my field and took what was available, new car salesman at a nearby Lincoln-Mercury dealership. Yup, when auto loans were 12-20% and President Reagan was the new guy.

    The sales manager, Frank Broome, was a genius. He’d found a series of codes for ordering a stripper Town Car (velour interior and wire wheel looking hub caps). He’d advertise it in the paper for $16,888. A Cartier edition with all the bells and whistles was $32k. Majority we’re $22-24k.

    The idea? Bring them in with the ‘deal’ but once you take their temperature and assess their ability to buy, move them up to a nicer car. Did that a few years before launching my career as an engineer. Won’t ever forget the lessons, the people, the experience. Quite valuable.

    Can you buy a new Lincoln today for $16,888? I don’t think so.

    • fajensen
      Feb 14, 2019 at 7:34 am

      Learning how to sell never hurt a career!

      They do the same stunt in all fields, like trail running or off road cycling kit – one goes shopping for “only the base model” and then one always buys at least the medium priced one. I budget for it now.

    • Paulo
      Feb 14, 2019 at 8:14 am

      In RE my Dad used to call it Bait and Switch, and that was in 1970. (Easier to do then). He didn’t do it but he worked with a guy that did…”Sorry, that one just sold but we do have…..”

      Sales ability is a very valuable skill. Unless you are a cubicle resident and stay there, all of us ‘sell’; our skills, interactions, products, services. The ‘best’ pilots in our company were really those that people, (customers and co-workers) liked. The others were, “He’s okay, but….:.” I knew a guy who owned a pretty good sized helicopter company. His words, “I can teach anyone to do the flying, but attitude and personality is what matters to us”. Sales.

      Back to cars. I am quite excited about planning a new truck purchase. I just found out my son (and direct family members) receive a 25% discount on MSRP with two companies. In two years I plan to retire my 33 year old Toyota PU. New brakes this week should take me there. I’m going to replace it with new, something I haven’t done for over 40 years. I have already started reading reviews and thinking about pros and cons which is 1/2 the fun. The VW Westy will be 40 years old that year. :-)

      • intosh
        Feb 14, 2019 at 10:53 am

        Ah yes, sell. The guy who sells is the superstar. Let the loser cubicle residents figure out how to actually deliver.

        “I can teach anyone to do the flying, but attitude and personality is what matters to us.”

        This reminds me of HP and Xerox. That kind of mentality took over at these companies and ignited their decline a couple of decades ago. Steve Jobs explained it best:
        https://youtu.be/h1orCiYdwyo

        So yeah, if you’re selling mediocre non-essential me-too products (or if you enjoy a monopoly), then a good Sales and Marketing team is your company’s lifeline.

        Ironically, most people hate it when the Sales guy run the country…

      • California Bob
        Feb 14, 2019 at 1:15 pm

        “I can teach anyone to do the flying …”

        Huh. That’s not the attitude that all the flight instructors and pilot examiners I’ve known had.

    • Frugal in the Bay
      Feb 14, 2019 at 10:26 am

      Always buy the base model. We email dealers to price match, never enter a dealership until we have secured a decent price. Then, we show up to buy. We bought our Toyota Corolla all-in in the Bay Area for 14.5k in 2013. It works great.

      Prices have been rising. Rents are extremely hard to lower when you have a family, even for frugal/FIRE types. Buying a house is ridiculously priced multiple times rent. Healthcare is skyrocketing – spent $1000 on an urgent care visit this year. Not a way to avoid given our health plan and in-network. The bill was for over $3000 for urgent care.

      We make 300k or so on a single income in the Bay Area and want to desperately leave. It’s not enough to buy a house in a good school district. We’re 30 with two kids. We’re being gutted by our $3500 in rent each month for a house with no heat/AC. It’s pretty horrible. The commute is so terrible that I can’t work, or I’d never see my kids during the week. Our timeline is two years to get out, so my husband gets some experience in a senior management position. I can’t wait.

      • JohnnySacks
        Feb 15, 2019 at 3:28 pm

        Use incentives if you have the luxury of time, they usually come into play at mid summer yearly turnover and apply to in stock only, so guess what – there are never any base models available (not as if there ever are anyways) We could only find 2 base model GM previous generation Colorado/Canyon mid-sized trucks within 150 miles of our major east coast city, so doing the homework and getting a solid price via long distance is mandatory.
        My buddy says WTF, the automatic would ‘only’ be $800 more, and I ask would you open your wallet and pull out 8 Benjamins so you didn’t have to use your right arm and left leg so much? And get something less durable as a bonus? But you’d gladly go 5 years long on it plus interest. If you have to borrow money to buy it, you can’t afford it to begin with.

    • Laughing Eagle
      Feb 15, 2019 at 11:58 am

      John I will tell you about Lincoln’s, as I owned a 1989 LSC two door coupe with the Mustang HO 5.0 liter engine. Great riding car and built for the interstate as it had a 600 mile driving range- 22 gal tank. But when the air bags system goes-big bucks. Could work on the engine with no problems by meaning you had room to get your hands in there.
      Had a 2002 Lincoln LS- 4 door sports car (basically) with a 3.9 liter V-8.
      Could beat anyone off the line, but only 13 mph around town.
      On the interstate only 300 mile range. Could not get your hands in to change spark plug- no room with out nicking your hands or arms.
      Would not buy any Lincoln today because I don’t like the styling and basically the both I owned were not reliable. In the 2002 had to replace all four window mechanisms as they had a PLASTIC wheel for the winding cord instead of metal. Buy a luxury car and some idiot engineer thought they could save a few bucks on a plastic wheel which breaks.

      • JohnnySacks
        Feb 15, 2019 at 3:37 pm

        Why Ford hasn’t given up on the Lincoln brand is a mystery to me. The stupidity is mind numbing. Their RWD Town Car was the last real model I associate with the brand – so durable that a nationwide market popped up when they were discontinued to buy up as many used/salvage ones as possible to pillage for parts to keep taxi and livery service fleets on the road.
        Now I don’t even know what I’m looking at – their sedan looks like a blinged out Taurus, the SUV crap looks like blinged out Ford models. I’d just say commit sepuku already, but is that even applicable to a zombie?
        And on that note, I’ll stop, it’s hard because the subject matter of Wolf’s diary hits home hard.

  13. Max Power
    Feb 14, 2019 at 7:08 am

    There have been all sorts of machinations which have helped folks afford that absolute price increase. Loan lengths have been stretched significantly and interest rates have fallen, while more folks lease. As such car payments have not gone up quite as much – and most folks buy payments not lump sum. Couple this with cars lasting a lot longer and it helps explain why people have been more willing to swallow the overall increase in the cash transaction cost of cars.

  14. Kent
    Feb 14, 2019 at 7:22 am

    I can’t wait to tell my employer about the hedonic adjustments that have been happening with my labor and the corresponding adjustments he will need to make to my salary.

    • fajensen
      Feb 14, 2019 at 7:36 am

      What flavour lube do you want with that?

  15. Unamused
    Feb 14, 2019 at 7:41 am

    =>These adjustments that bring down CPI include “hedonic quality adjustments.” They’re not a secret.

    The fact is, prices go up, a lot, no matter the convenient methodologies your masters exploit to explain them away.

    Worker productivity has surged even more over these same periods. No ‘hedonic quality adjustments’ there. We certainly can’t be applying these rules consistently, now can we? Where’s the rentier profits in that?

    It’s a system designed to screw you and make you like it, and it works. Vaseline not included.

    That’s no secret either.

    • Unamused
      Feb 14, 2019 at 8:00 am

      It’s just one of the very many ways that people who work for a living get cheated, by employers, by retailers, by bankers, by governments controlled by ruthless corporations, by clueless political hacks who are loved for their endless lying, not that we’re naming names here.

      There are hundreds of them. Somebody should make lists.

      In related news, the US food and water supply is increasingly unsafe, all across the board. You’ve been systematically poisoned your entire life. Work that into your lists.

  16. Jon
    Feb 14, 2019 at 8:00 am

    Reminds me of how the USSR would fiddle and inflate results to meet the ever increasing production goals. At what point does the system collapse on itself?

  17. timbers
    Feb 14, 2019 at 8:25 am

    The CPI – for it to be used in the manner the Govmit and Fed represents it as being used – should include in it’s “basket” a robust mix of where all the money (QE) went – a robust mix of stock market indexes and real estate.

    And, if the Govmit further adjusted that stock market mix included in the CPI with similar “adjustments” as they do cars and other items in the CPI, they will probably have to substantially further inflate the actual recorded stock market prices as I suspect stock owners in in fact getting less and less over time vs what stock equity once represented.

    Then, they can take the much revised upward CPI figures an back pay Social Security benefits and other beneficiaries they’ve been underpaying to tens of millions of working folks.

    If they worried about “deficits” they tax themselves with a progress income and business tax, or do what the do to fund tax cuts for the rich and war spending – print more money.

  18. yngso
    Feb 14, 2019 at 8:33 am

    Carmageddon you say Wolf, respectfully, it’s about much more than that, s you hint at finishing. Theres a ginormous autoglut, too many vehicles produced and too many brands and models.
    Petrolheads aka car lovers say that the diversity of yesteryear is gone. So dozens og models and a few more brands need to crash out and only the best remain. I see only 3 strong automakers, Mercedes Benz, VW and Toyota, 2 of them in Germany and none in the USA. Renault-Nissan was going strong, but is probably a goner now that Gohsn is gone, puns intended.

    • Hugs
      Feb 14, 2019 at 9:39 am

      The (suspicious) sudden discovery of emissions cheating was a direct shot at German car manufacturers. Hard to make AFVs (armored fighting vehicles) in quantity without an auto industry. Ford and others can be taken under the wing of the Pentagon. GE could be given a sweetheart deal making mobile-medical-vehicles and suddenly be over $100 a share with extra tasty dividends. Switch from world-greater-good to country-greater-good.

  19. c smith
    Feb 14, 2019 at 8:37 am

    “But I can no longer buy a new 1996 Taurus for $17,995. That choice doesn’t exist.” Why would you want to? I would argue that you might only be willing to pay 20% or 25% LESS than $17,995 for such a vehicle given the lack of modern features (safety, mileage, creature comforts, durability, etc.) which we now take for granted. In some cases (you mentioned phones) Hedonic adjustments are nowhere near LARGE enough.

  20. Keeper Hill
    Feb 14, 2019 at 9:06 am

    The let them eat iPads crowd should be taken out back. People complain about populism and I laugh.

  21. Augusto
    Feb 14, 2019 at 9:15 am

    CPI is an assumption and rule driven estimating process where each individual part of the calculation is assessed, but the overall result is not. It makes no sense until you realize it is produced by government bureaucrats where adherence to rules outweighs any application of common sense, including considering the use other methodologies that either verify or question the underlying supposition(s) (to work towards a better result vs adding to some fictional multi year comparison chart) . As a result, their product is near worthless, other than it employs lots of government workers and takes productive time away from industry who have to fill out their useless surveys. Worked with a lot of government data in industry, which we always reworked or discarded when doing business plans…on a positive note, it frequently served as a bad example of data gathering, processing and reporting.

  22. Scott
    Feb 14, 2019 at 9:21 am

    Does the hedonist adjustment go the other way? I’ve found that everything from microwaves to hand tools to clothing to storage boxes lasts significantly less than older versions. This is even true for cell phones (but not cars).

    • Endeavor
      Feb 14, 2019 at 10:02 am

      Yzes Smith on Naked Capitalism site calls this decline in product quality ‘crapification’

  23. Hugs
    Feb 14, 2019 at 9:24 am

    Prices go up until sales go down too much. Record debt from vendor financing. US can isolate and let rest of world find their own solutions. Or US can continue to try to make the current unworkable system work. Large portions of the world think things come into existence by rubbing magic lamps. Cargo cults have retooled as caravans on the road to El Dorado.

  24. ohio
    Feb 14, 2019 at 9:26 am

    I bought a 2010 civic new and 2017 civic new. They were pretty close to the same price $18,400. 2017 is made in USA mostly, bigger, faster, better milage (40 mpg), safer. 0.9% financing for 5yrs on the 17. Seems to me like people feel they deserve more car now is the bigger difference… the trucks I park next to are unreal. love the blog… SF is so different

  25. lenert
    Feb 14, 2019 at 9:41 am

    When millions of sub-prime loans default, it “should” put downward pressure on prices. Unless maybe the cars don’t get repossessed?

  26. Winston
    Feb 14, 2019 at 9:52 am

    Well, surprise, surprise, surprise, the government lies to its advantage. Whoda’ thunk?!

    Hedonic adjustments = wild ass guesses to measure the subjective.

    Substitutions – can no longer afford steak, will switch to hamburger, so no change, still eating.

    Substitutions and Hedonics: Inflation Data Absurdities
    Jan. 24, 2007

    https://seekingalpha.com/article/24933-substitutions-and-hedonics-inflation-data-absurdities

    Why Michael Boskin Deserves Our Contempt
    January 19, 2010 9:15am by Barry Ritholtz

    “The debate about the CPI was really a political debate about how, and by how much, to cut real entitlements.” – Greg Mankiw, chairman of George W. Bush’s Council of Economic Advisers from 2001-2003

    For those of you who may be unaware, Boskin is the economist/weasel/fraud who helped to officially distort the CPI, making it more or less worthless as a measure of inflation. The Boskin Commission was an act of fraud, a backdoor method to suppress Social Security cost of living adjustments (COLAs). To be blunt, it was an act of cowardice. Rather than man up and say “fix this, its broken, we can’t afford it” the commission took a different route — they fabricated a series of nonsense adjustments that artificially lowered CPI by 1.1%.

    • Mike G
      Feb 14, 2019 at 2:32 pm

      Trump’s Chairman of the Council of Economic Advisers is Kevin Hassett, one of the authors of the infamous “Dow 36,000” (1999).
      The crapification of economic advisory continues apace. We may as well switch to carnival barkers and 3-card-monte hustlers.

  27. Mike Are
    Feb 14, 2019 at 9:54 am

    If you understand the big picture of what has been going on in our economy, none of this is any surprise.

    Excellent article Wolf that paints the real truth.

  28. ft
    Feb 14, 2019 at 10:52 am

    Inflation is a form of sneaky, underhanded tax. CPI is a curiously blatant lie trying to make us believe that the rate is smaller than it actually is.

  29. Bankers
    Feb 14, 2019 at 10:55 am

    According to statista and others, raw material costs are @ 50% of price.

    Steel sheet has more than doubled since 2000

    https://fred.stlouisfed.org/series/WPU101707

    So maybe raw materials cost the same nowadays as a previously finished auto? Feed in other inflation affected costs to total cost, add tax to that and you end up with similar auto for double the price.

    I don’t know the industry in great depth, but you are looking for reasons for high prices and there is one of them.

    Add some cheap nice looking trim and it all gets to be counted as a buyers luxury.

    • Feb 14, 2019 at 11:26 am

      Off the top of my head: a car weighing 4,400 pounds (2 metric tonnes) empty might have 75% of its weight in steel (other materials include lots of aluminum, but also rubber, leather, plastics, etc.) So that would be 1.5 metric tonnes of steel.

      Hot rolled steel in Feb = $773/tonne; cold-rolled steel = $909/tonne. So average $850 x 1.5 = $1,275 cost of steel in a vehicle that sells for $36,000. Thus the cost of steel would be 3.5% of the sales price of a vehicle.

      • Bankers
        Feb 14, 2019 at 12:33 pm

        I don’t argue with that, but material costs total are placed at

        https://www.statista.com/statistics/744910/cost-breakdown-of-car-production-by-segment/

        Exactly what is included in material costs I do not know, but the implication is that they are closely related to commodity prices. I also expect auto plants are electricity powered, so the decrease in oil price is only indirect and maybe nearly unnoticeable as per steel prices.

        Someone more knowledgeable would have to fill out the full detail.

        :-/ ?

      • Robert
        Feb 14, 2019 at 2:43 pm

        That is very, very interesting Wolf, but I would say 75% of the weight in new cars today is Marshmallow Fluff- the cars are so flimsy and full of plastic that a 10 mph collision is a totaled car- and the increasing fatality rate IMHO is directly related to this fact, airbags and so called safety improvements notwithstanding.
        I think there are millions of potential buyers who would flock to new models that were no frills, but very durable. The ad for it would be a piece of cake: a demolition derby where every other car was reduced to a crumpled heap in a matter of minutes.

    • char
      Feb 15, 2019 at 11:36 am

      20 years ago they used lower quality steel in cars than they do now so raw material price increase is more.

      • Robert
        Feb 15, 2019 at 4:01 pm

        Whatever. I saw a guy on TV who had restored a Henry J and offered a baseball bat to the reporter: “I defy you to do ten dollars worth of damage”(not counting glass.) I could easily total any car on the road today with a baseball bat.

  30. Kenny Logouts
    Feb 14, 2019 at 11:03 am

    GPI – government propaganda index

    It’s when you see these types of articles you immediately see Winston in his booth blindly adjusting history and reports… now much more efficiently via the inner-net.

  31. Bobber
    Feb 14, 2019 at 11:33 am

    The items going up in price are huge items not fully represented in CPI, whereas items dropping in price are relatively insignificant but overrepresented in CPI.

    The big items: housing, tuition, healthcare, daycare, autos, retirement saving

    The little items: gas, clothing, electronics, food

    The CPI is a joke; a tool to screw.

    Who loses? Workers that don’t get adequate wage adjustments (Average Joe)
    Who wins? Government and its beneficiaries, through increased taxes; corporations at the front end of price movements.

  32. Dan
    Feb 14, 2019 at 11:59 am

    Just a note to those who discuss totally unrelated issues such as my mechanic did this, or that, and I can’t find parts for this or that.

    Wolf is giving us a very important and mind boggling piece of information regarding just how arbitrary and deceitful the government statistics are, and instead of discussing this important issue, you are discussing whether you should have chicken or beef for dinner. How about staying focused on that important subject?

    • MB732
      Feb 15, 2019 at 10:22 am

      Dan your time is obviously quite valuable and my comment is going to be off-topic and not enlightening so you should stop reading. Seriously, stop.

      What I want to…Wait–Dan? C’mon Dan, stop reading…OK here goes…

      1996 Taurus = $17,995

      Dan using ‘chicken or beef for dinner’ as an example of topic not relevant in discussion of CPI = Priceless

    • Jeff
      Feb 15, 2019 at 11:19 am

      It is good you realized the truth of government statistics and thank you Wolf for helping him. Many of us have known this for years. Nothing new in government lies, distortions and statistics.

      I personally enjoy many of the tangents readers go down and get much personal enlightenment from these not quite related threads.

  33. Mr. Knoss
    Feb 14, 2019 at 12:01 pm

    But wait.

    The transaction cost for a 1996 Ford Taurus was 49oz of gold, vs the 2019 Ford Taurus transaction cost of 21oz of gold.

    Not only has quality and safety improved, but is was done at a lower cost, priced in Gold.

    I first realized this relationship with cars when I compared my used 2001 Maxima with my used 2008 Lexus.

    The Lexus is a far superior vehicle and cheaper, priced in Gold.

    • Feb 14, 2019 at 3:41 pm

      OK, now check the price of a Taurus in 2011 in gold (at $1,900/oz) and compare to a 2019 Taurus priced in gold (at $1,300 oz). I’m not going to do the math, but the price of gold has dropped over 30% over those years, while the price of a Taurus has risen. So you might have to pay 40% more in gold today for a Taurus than you have had to pay in gold in 2011

      • Mr. Knoss
        Feb 16, 2019 at 10:52 am

        Let’s cherry pick the data some more.

        On 10:30am on February 15, 2019 you could by a new Taurus with 21.21oz of gold, at 2pm that same day 21.12oz of Gold.

        Nevertheless, the 22year period correlates nicely with a 4% annual inflation rate. Which also correlates nicely to the M1 monetary base growth over that same 22 year period.

  34. Sadie
    Feb 14, 2019 at 12:04 pm

    Hedonics: The branch of psychology concerned with the study of pleasant and unpleasant sensations.

    BLS: The branch of economics concerned with turning irrationality into rationality.

  35. R F PATTON
    Feb 14, 2019 at 12:21 pm

    I do not think comparing the older model to the newer model is accurate. The current Taurus is a name resurrection only applied to an upscale car, not a Taurus replacement.

    • Feb 14, 2019 at 3:46 pm

      The Taurus was upscale for Ford at the time. The scale went like this (for cars): Festiva, Escort, Tempo, and Taurus — this included the Taurus SHO which had a Yamaha-designed DOHC engine, something Ford had never heard of before until then. And for old people, rental fleets, and cops, there was the Crown Victoria. And that was it.

  36. Chris
    Feb 14, 2019 at 12:29 pm

    The most important feature by a long shot is wheels. An engine. The fact it drives. Fat lot of good those improvemts do when you’re on the bus.

  37. Chris
    Feb 14, 2019 at 12:36 pm

    I’m sure the CPI never accounts for fact McMansions aren’t mansions. (For example) They’ll give points for the genuine technological improvements but never demerits for the cheap crap that gets built compared to olden times. Same with appliances etc.

  38. rop tre
    Feb 14, 2019 at 12:47 pm

    They can find some stupid exuses for cars but what about a basic Big Mac? In 2008 it was $3.57 while in 2018 it clocked at $5.51. That is a nice 4.43% yearly increase. Of course there is inflation! And if you think differently or you live under a rock or you are disonest

    • MoreMoneyPlease
      Feb 14, 2019 at 8:55 pm

      Big Mac vs CPI chart:

      https://static.seekingalpha.com/uploads/2017/11/1/3948-1509552555842769.jpg

      Without going into detail, products are often times engineered to the specific warranty, so good chance you are buying a lower quality auto (in terms of repair costs) if the warranty is 3 years versus 5 or 6 years. Billion dollar auto companies do not hand out 5 and 6 year warranties to lose money, so there is more money in design, testing, and reliability needed. And once in production, engineers are forced to cost reduce part costs until a limit is hit, which can result in recalls if liability costs and bad publicity exceed profits.

      I think it is common knowledge that cars have very small profit margins, and truck/suvs are much larger in comparison. Repair parts are even higher profit margins, so trust me when I say ignorance is bliss as a plastic part can be 1000% to 2000% profit margin. Exception to the profit rule is exotic sports cars, as Ferrari has a profit margin average around $80,000 per auto, which is amusing as Ferrari carries only a three year unlimited warranty (although you can buy a 15 year warranty for MoreMoneyPlease).

  39. Marc D.
    Feb 14, 2019 at 1:12 pm

    You could probably find a compact car today (which have grown and are about as big as midsize used to be), and get a base model for the price of that 1997 Taurus. And base models are fairly well-equipped nowadays. So, I can see the BLS’s argument to some extent.

    Although as the article says, most people aren’t doing that; they’re buying bigger and more expensive vehicles loaded with modern tech features, so the average transaction price is much higher.

    • DF
      Feb 14, 2019 at 1:32 pm

      I was going to say just that. I think one big factor driving up average transaction prices is that, as cars get more reliable, people have less interest in buying base models of cars new — they’ll either get an optioned-up new car, or buy that car used a few years later.

      Here’s another inflation calculation: my 1989 Bronco II cost $14k new. That $14k is equivalent today to $29k. You can get a Jeep Wrangler that’s better in every way than that BII for about $28k.

      Another thing to consider is that the Taurus moved upmarket in the 2000’s from their midsize offering to their fullsize offering. Wolf should really be comparing the 1996 Taurus to a contemporary Fusion.

  40. Juanfo
    Feb 14, 2019 at 2:58 pm

    In a way cars still cost the same. The average individual can still buy and drive the same average car. What changed is that 20 years ago they paid cash or paid it off in 5 years. Now the same loan is extended indefinitely. Also cars are more reliable and durable now because so called owners will quickly stop making monthly payments if they can’t go to work in a broke down car.

  41. Setarcos
    Feb 14, 2019 at 5:03 pm

    College tuition and fees are up over 200% for the same period of time. Car prices are de minimus in comparison.

  42. NoName
    Feb 15, 2019 at 1:39 am

    Totally bizarre that you compared a 1996 Taurus to a 2019 Taurus. Didn’t you sell Fords?!—You should know they are two totally different vehicles.

    Who pays sticker for a 2019 Taurus? “Starting price 27k”? Easily purchased for 18k, and that includes rims and not hubcaps, and a BIG, SMOOTH, POWERFUL V6 (though I think the past year or two that might have changed).

    Why didn’t you compare 1996 vs 2019 Accord or Camry? Much more appropriate. I think they’re actually cheaper today!

    2019 Taurus is huge and semi-premium (though I’d never drive a bunker). 1996 Taurus was a junky, cheap, flimsy thing (had one). Not even comparable!

    2019 Taurus is bigger than 2019 Avalon; you compared wrong size. That’s like saying “2019 Avalon costs 55% more than 1996 Camry!” – Well, duh!

    The fact it took scrolling to the very last comments for anyone to note this says a lot—your readers didn’t know, they’re reading what they want to read, and you feed it to them.

    Wow—disappointed in you!

    P.S. The Taurus was not “upscale for Ford at the time”—no one would have said that, then or now.
    Joke on SNL from 13 years ago, “After 20 years, and sales of nearly seven million cars, Ford has announced that it will no longer make the Taurus, forcing many thirty-somethings to find a new way to show the world they’ve given up on their dreams.”

    • Juanfo
      Feb 15, 2019 at 9:42 am

      A Taurus is a Taurus is a Taurus

      • NoName
        Feb 15, 2019 at 12:12 pm

        Not really. “Taurus” today is actually “Five Hundred”, a non-Taurus. “Taurus/Five Hundred” is based on Volvo. Volvo ≠ Taurus. Error: your comment has failed.

    • Feb 15, 2019 at 11:07 am

      NoName,

      Good lordy. So much nonsense in such a small space. I don’t even know where to start. Part of the problem is that you didn’t even read the article and missed the biggest points, or else you wouldn’t have written this (because we AGREE on these points). So here are some points.

      22 years makes a big difference in auto technology. That’s exactly what the article said, and it was one of the big aspects of the topic in the article, which you didn’t even read, obviously.

      So here are just a few pointers:

      1. You said, “Who pays sticker for a 2019 Taurus?” No one pays sticker, neither in 1996 nor in 2019. What made you think anyone paid sticker in 1996? Did you think people back then were morons? Dealer discounts and factory incentives and rebates are nothing new. But comparing the low-end sticker prices of both vintages keeps it apples to apples.

      2. You said “2019 Taurus is huge…” So let’s see: The overall length of the 2019 Taurus is 202.9″ — just 3.3 inches longer than the 1996 (199.6″). You cannot even see a difference of 3.3 inches in length of a car that size.

      4. You said “2019 Taurus is … semi-premium.” Back when the Taurus came out, it was Ford’s hottest new thing. Its shape (rounded) arrived when edges were all the rage. A well-equipped Taurus in 1996 was as close to “semi-premium” as Ford could get at the time. The Taurus SHO was the most expensive car it sold. It was “premium.” It was designed to knock the doors off BMWs. Many standard equipment items you find in today’s basic cars were not even available in super-luxury cars in 1996. This was addressed in the article, and it was in part what the article was about (hedonic adjustments).

      5. Both vintages had V-6 engines. Don’t fool yourself. The V-6 has not been invented recently. And the technical and performance improvements over the 22 years were the key topic in the article (hedonic adjustments).

      • Laughing Eagle
        Feb 15, 2019 at 11:42 am

        Wolf, also 1996 Taurus had only 145 hp, while the 2019 has 288. Double the hp in the 6 cylinder engine. Hedonic change.

  43. char
    Feb 15, 2019 at 12:10 pm

    Many car makers have the habit to increase the car half a size with every redesign. See for example the Up! which is closer to the original Golf than the latest Golf. Then there is how premium a brand is. See for example Cadillac and Audi. Ford is trying to get more premium.
    To compare cars now with 20 years ago for inflation i should go with wheelbase and not name.

  44. Feb 15, 2019 at 7:36 pm

    When your nonsense gets shot down, you don’t get to argue with it.

  45. Jim
    Feb 15, 2019 at 11:55 pm

    Time for some Hedonic adjustments to our income tax payments.

    Since everything we need is more expensive, healthcare, housing, student loans, food, and whereas the government does not need to buy, these thing and the government claims that products are really getting better, then they can do so very much more with our money.

    For example, while more expensive in dollars, the F-35 does so many more missions, therefore it’s actually “cheaper.”

    Therefore, we should subtract whatever general overall Hedonic adjustments there are from the bottom line of the checks we send them–after claiming exemption from withholding, of course.

  46. eg
    Feb 16, 2019 at 10:19 am

    Perhaps tangential, but I never buy new cars. I buy used NorAm sedans with steep depreciation about 3 years in and drive them into the ground.

    Rinse and repeat.

    • Cashboy
      Feb 17, 2019 at 2:43 am

      I think buying a three year old car and drive it into the ground is the best way.
      The days of owing a car and just going for a drive is gone in the UK.
      The sole purpose is for getting from A to B when it is essential and hope you don’t get any fines on a trip.
      I even think the status symbol of a car is going as I see the future as keeping a low profile.

  47. THOMAS MANNING
    Feb 18, 2019 at 4:58 pm

    I’ll make a wild prediction. The prices of cars, real estate, and boats and RVs will crash when interest rates rise just 3 points higher. It certainly won’t hurt to own an old home with some vegetable producing land.

Comments are closed.