Cars Gobble Bigger Bite of Our Paychecks

More than a decade ago, auto buyers had their first encounter with dreaded “sticker shock” over huge price increases that were being passed on from car manufacturers.

I doubt the buying public has ever recovered from that bout with inflation, though experts express mixed opinions about the issue.

Everybody who walks into a showroom these days has a sense that cars have grown more expensive, perhaps prohibitively so. A typical mid-size sedan or a sport utility vehicle easily costs $20,000, enough money to pay for more than a year of college or take a couple of pretty nice vacations.

And government taxes and fees have exploded, adding as much as 10% to a new car’s cost.

Cars have grown more expensive, in part, because we have come to expect more from them--in terms of safety, convenience and performance. But it is also true that cars are less affordable on average than at any time over the last two decades, thanks to stagnant household income.

The Department of Commerce reports that the average new car cost $17,413 in the first part of 1992. It took the average buyer of that car 25.6 weeks of his or her family’s earning to purchase it.

By comparison, in 1973, it took just 17.5 weeks of earnings to buy the average new car.

It helps explain why the fleet of cars on America’s highways is getting older on average each year. Clearly, a lot of Americans are being priced out of buying new cars.

But John Hammond, senior partner at the market research firm J. D. Power, believes that cars are a better deal today than in the past. He finds that prices, transaction prices rather than the sticker prices, have gone up about 13% to 15% in the last several years, while general inflation is up about 18%.

Hammond’s figures differ from the Commerce Department’s because he has adjusted the numbers to reflect the changes in how cars are equipped. The difficult part is knowing whether consumers want this additional equipment or are obliged by federal law to accept it.

If consumers could buy a 1967 model car today, without emission controls and safety equipment, it would cost just $8,406 and would require only 12.4 weeks of income to buy.

But buyers seem drawn to pricey equipment. People expect air conditioning, power door locks, power windows, remote trunk releases, cloth interiors, and trip odometers--items that were once not offered or available only on luxury cars.

In addition, many consumers actually want the equipment required by federal law, such as seat belts, air bags, head rests, crash bumpers, catalytic converters, and computerized engine controls.

The Motor Vehicle Manufacturers Assn. estimates that the average new car contains $2,582 worth of emission and safety equipment, compared to 1969. And the increases are not over yet.

Between 1994 and 1996, car manufacturers must comply with new federal regulations to add protection from side impacts. In addition, optional air bags are going to become standard equipment. Anti-lock brakes will also be showing up on more cars. These are items that cost $500 to $1,000 each.

If the trend keeps going, I suppose at some point people will be able to afford one car in their lifetime. But will it ever be a great car.