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 Why new cars and trucks cost more than they have in a decade

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MotownG5
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PostSubject: Why new cars and trucks cost more than they have in a decade   Mon Feb 13, 2012 10:52 pm

If you're walking into a new-car showroom on a shopping trip, you should brace yourself for a little sticker shock. Not only have prices reached a new high, they're outpacing inflation -- and reversing the deals Americans grew accustomed to over the past decade.


Thanks to a renewed demand for new wheels and a brace of new models replacing aging products, the average price for a new car or truck rose to $28,341 in 2011, up 11% from 2008, according to data from J.D. Power. Those increases weren't just limited to luxury sedans and big SUVs; as of today, there are no new cars for sale in the United States for less than $10,000. Many new models forgo stripped-down versions for ones with far more expensive options; the previous generation Ford Focus could be had for $15,000 with generous incentives, but the newer version comes in a "Titanium" edition that can carry a sticker price of more than $30,000.

But dollar figures alone don't tell the whole story. Thanks to inflation, all dollar amounts rise over time, and only by adjusting new vehicle prices for inflation can we tell whether cars and trucks just seem more expensive or are truly taking a larger bite from our wallets. Doing so reveals that you're right in thinking these numbers seem high:


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This chart shows inflation-adjusted new car and truck prices dating back to 1998, with December 1997 set as the baseline. Starting in 1999, the real prices of new vehicles began to fall, and kept falling for an entire decade, until the financial meltdowns of 2008 and 2009.

The reason? Detroit's lack of self-control. Following the SUV booms of the 1990s, Detroit automakers built far more capacity for vehicles than they could sell to retail customers. Automakers only make a profit when a vehicle leaves a factory, and after the boom eased around 2001, keeping those factories running became the top concern of General Motors, Ford and Chrysler. If that meant dumping cars into rental fleets, or giving some shoppers no interest loans for six years or rebates that touched $6,000 per vehicle, so be it.

By fighting on price, Detroit forced foreign automakers to follow suit, further pushing prices down. That glut of new vehicles eventually became a glut of used vehicles — also depressing demand and prices. Only when the U.S. economy faltered and Detroit's three automakers were forced to close nearly a dozen assembly plants did supply shrink enough to match demand.

Last year's disasters in Japan also cut supply, just as Americans began replacing cars they had held onto through the recession. As a result, inflation-adjusted prices quickly soared — clawing back the declines of a decade in less than two years. J.D. Power's data shows that while prices rose over the past four years, incentives fell 11% to $2,680 in 2011.

While prices eased a bit at the end of 2011, they traditionally rise at the beginning of the year. Given that Detroit, Japanese and Korean automakers have all vowed to avoid incentive wars and trim production rather than prices when sales inevitably dip, it's likely new vehicles will soon cost more after adjusting for inflation than they have at any point in the past 14 years. It may be about as long before an automaker decides again it needs to make deals rather than profits.

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304KustomZ of Morgantown, WV
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dlinsbeck
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Mon Feb 13, 2012 10:59 pm

Unfortunately, I think that is the nature of the way we spend money these days. Everything is getting more expensive. I know when I bought the Mustang, it was really disappointing walking out the place with the sticker shock! Guess that is the price we pay to play. It would be nice to go back to the days when cars cost a couple thousand dollars, but at that time, those were expensive!


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MotownG5
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Mon Feb 13, 2012 11:04 pm

no kidding. 3-4k for a car was a huge price tag back in the day. although quality of vehicles have gone down though. with all the classics that are still around today.... how many 2012 honda civics or what have you, will be around in 50+ years


304KustomZ of Morgantown, WV
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dlinsbeck
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Mon Feb 13, 2012 11:06 pm

LOL! Probably none at all. They definitely don't make them like they used to!


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MotownG5
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Mon Feb 13, 2012 11:08 pm

dlinsbeck wrote:
LOL! Probably none at all. They definitely don't make them like they used to!

That's what I'm saying lol, as bad as it seems... I use that saying all the time at work, and I hate it. With all the technological advances we've made, you figure quality would be better, but everyone is concerned with quantity it seems.


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D-Rod
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Mon Feb 13, 2012 11:25 pm

Keep in mind that salaries have also increased as vehicle prices have risen. This sounds wierd but if you want to see how much things have changed over the years, go into Bob Evans and check out the pamphlets for each year. We did the math a couple years ago and the % of sallary vs gas/milk/vehicles ect is actually better now if I remember right.

Now, dont get me wrong, it is rediculous what some cars cost but you can get really nice brand new cars for decent prices......Focus, Elantra, Cruze, ect. $15K for a brand new car with alot of options is pretty reasonable IMO.

^^^^Just getting the discussion going. :)


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Tygur
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Tue Feb 14, 2012 12:40 am

Thats just nuts. Its difficult for me to see people buying new cars. Hell we don't make much $$ but around here we do fairly well compared to most of my friends. Considering that, we still have never shelled out more than 6k or so for a vehicle, never got a new one. Its just too much. On the bright side, all 3 of our vehicles are fully paid for, and so is our house, so its all how you work it out.

Still not any less painful, and it makes me sad that not only are basic models becoming few and far between, but so are manual transmissions. It hurts to look back as well and see what someone paid for a vehicle that you have sitting there, all beat up and tarnished. The freaking Z I have was supposed to be like 26 grand when it was new. Back in 1984! Who the hell would have sprang for that?!

Sorry /rant
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tkromer
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Tue Feb 14, 2012 7:42 am

I think if that chart went back 100 years, we'd see that the last 20 years are the cheapest in history.

I don't understand the sentiment that older vehicles were built better either. FAR more things failed, they were just easier to fix back then because they were less complex.
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Blacked Out
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Tue Feb 14, 2012 9:27 am

I agree with Tkromer on this, u never see pictures of people working on new cars, but there are tons of pictures with the hood up on old muscle cars lol.. They would never have dreamed of a 10 year 1000000 mile warranty in 1969.
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2many2choose
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Wed Feb 15, 2012 3:00 am

Meh, I'll stick to my 200k mile F250. It's a good 'ole pushrod with big axles with just enough computer junk to pass emissions if we're ever tested... granted... I did hollow out the cat. LOL
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r/tguy02
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PostSubject: Re: Why new cars and trucks cost more than they have in a decade   Wed Feb 15, 2012 8:49 am

tkromer wrote:
I don't understand the sentiment that older vehicles were built better either. FAR more things failed, they were just easier to fix back then because they were less complex.

i agree 100%, thats why i keep my neons around, theyre very easy to work on.
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