Economists will tell you the average price of a new car has doubled in the last 15 years.
Auto industry analysts counter that it now costs consumers less, in terms of percentage of household income or weeks’ pay, to buy a new car than it did their parents or grandparents.
True in both cases.
But while car prices are climbing, so is the amount of family income needed to buy new wheels.
In 1947, the earliest year we’ve been able to track these statistics, the average price of a new car was $1,864, according to the U.S. Commerce Department’s Bureau of Economic Analysis.
That same year, median family income was $3,031, according to the Bureau of the Census.
Thus, it took 61.5 percent of the family’s annual income in 1947 to buy a new car–about 32 weeks.
Thanks in large part to postwar inflation, that figure had risen by 1950 to around 66.6 percent, or about 34.6 weeks. Commerce figures show the average new-car price in 1950 was $2,210 and the median family income was $3,319.
Car prices shot up in the ’50s, but not as quickly as family income in the Eisenhower Era. By the time John F. Kennedy was elected president in 1960, the average sticker on a new car was $2,853, and median family income was $5,620. Thus, it took only 50.8 percent of the annual household earnings–about 26.4 weeks–to buy a vehicle.
The gap between car prices and family income widened even more in the ’60s and ’70s even as the auto industry began adding equipment to meet government safety and emissions requirements.
By 1970, it took less than 36 percent–or 18.7 weeks–of the family’s annual income of $9,867 to buy a new car priced at $3,542. The percentage holds for a decade later. In 1980, median family income had more than doubled, to $21,023, and average car prices had risen to $7,574. Yet it still took only 18.7 weeks’ pay to buy that new car.
By 1990, the average new-car price had doubled again, to $15,472, and median family income rose to $35,353. So it took nearly 44 percent of annual household income–about 22.8 weeks–to buy a vehicle.
And by 1994, the last year for which both sets of figures are available, income had risen to $38,782. But car prices climbed to $18,657, requiring 48 percent of the household income, or 25 weeks’s pay.
THE REAL COST
Here’s what it costs to buy a new car. The weeks of income and percentage of income categories reflect the ratio of the price of the car to income: %% Year Average Median Weeks of Pct. of
car price income income income
1950 $2,210 $3,319 34.6 66.6
1960 $2,853 $5,620 24.6 50.8
1970 $3,542 $9,867 18.7 35.9
1980 $7,574 $21.023 18.7 36
1990 $15,472 $35,353 22.8 43.8
1994 $18,657 $38,782 25 48.1
%% Sources: American Automobile Manufacturers Association, U.S. Department of Commerce, U.S. Department of Labor.
Originally Published:
