Are cars really more expensive than they used to be?
A friend recently had a conversation with his elderly uncle, who said, "Fifty years ago, we could get a nice car for four, five thousand dollars. But today, they cost a fortune!"
I hear that kind of complaint a lot, especially from older readers. And it's true, at least in one sense: The average new car today costs about $30,000, and that's a lot more than anyone was paying in 1965.
But people have a lot more dollars to spend nowadays, thanks to the effect of inflation over time. Is it really true that cars are more expensive once we take inflation into account?
Let's take a look.
That old red Mustang: $2,614 for starters, about $4,000 loaded
Let's consider the handsome car in the photo at the top of the page, a 1965 Ford (NYSE:F) Mustang convertible. When new, it had a starting price of $2,614.
But let's consider a slightly racier version of that car, a Mustang GT convertible. Using the vintage price lists found at OldRide.com, I "built" a nicely equipped 1965 Mustang GT convertible that would have had a sticker price of $4,042.55.
Our imaginary new Mustang has all the goodies: The hot 271-horsepower 289-cubic-inch V8, a four-speed manual transmission, power disc brakes, power steering, power convertible top, all the interior options, even air conditioning -- an expensive ($277.20) option in 1965.
According to the handy calculator found at the website of the U.S. government's Bureau of Labor Statistics, our loaded 1965 Mustang GT convertible would cost $30,575.79 in 2014 dollars. Nowadays, $30,575.79 will buy a pretty decent car. But will it buy a new Mustang GT convertible?
Not quite, it turns out. Here's why.
The new Mustang costs more -- but you get more
I loaded up our hypothetical 1965 Mustang because I wanted to get it as close as I could to the equipment found on a new 2015 Mustang GT convertible -- which has a base price of $42,425, including the $825 destination charge. It is more expensive, in constant dollars, than its 40-year-old ancestor. But you get a lot more for that money.
The Mustang is all-new for 2015, and the GT convertible comes standard with the modern-day equivalents of all of those options we added to the 1965 -- along with a bunch of standard features that most buyers wouldn't even have imagined in 1965, like satellite radio, electronic stability control, and a backup camera.
It also includes -- again, as standard equipment -- features that were only found on high-end luxury cars in 1965, like power windows, power seats, and a fancy stereo. It's a much safer car, with much more advanced crash protection, anti-lock brakes, airbags, and a host of other features that make it much more likely that you'll survive a brutal accident.
Our 435-horsepower 2015 Mustang GT will run rings around that "hot" 271-horsepower 1965. It'll stop much better, too, with its bigger and more advanced disc brakes. And with a six-speed manual -- two more gears than the 1965 had -- it might even get better fuel economy, with much cleaner emissions. (Of course, it also weighs about a thousand pounds more than that 1965 model.)
In the case of the Mustang, you'll pay more for today's car. But even the cheapest cars include a lot more than most models did in 1965.
Even the cheapest cars include a lot more standard equipment nowadays
Think about what the options on that old Mustang cost. In today's dollars, just the air conditioning would cost more than $2,000.
Things like air conditioning and power steering aren't usually optional nowadays. Even the cheapest version of Ford's subcompact Fiesta includes them as standard equipment -- along with things like airbags, which weren't available at any price in 1965.
Car buyers expect a lot more now than they did in 1965. Regulatory requirements are much more extensive. And automakers have realized that it's cheaper -- from an engineering and production perspective -- to just build features like air conditioning into every car, rather than introducing complexity by making them optional. (That's why only the very cheapest cars come with hand-cranked roll-down windows now, by the way. The cost of engineering and producing two separate systems -- standard hand cranks and optional power windows -- isn't worthwhile when most buyers will simply order the power window option.)
And there's one more factor to consider when we're comparing new cars to old: Cars and trucks last a lot longer nowadays. The average car, truck, or SUV on U.S. roads nowadays is more than 11 years old -- more than double the average in the 1960s, when cars in many parts of the country would be rusted away before their 10th birthdays.
Are cars really more expensive now?
It is true that new cars aren't quite as expensive as some of my readers seem to think. As we've seen, inflation accounts for much of the price increase we've seen over the last 50 years.
But my friend's uncle, and my readers who agree with him, do have a point. When we compare apples to apples, or at least Mustangs to Mustangs, we can see that there has been some increase, even when we take inflation into account.
However, we've also seen that we're getting better, safer, cleaner, more comfortable cars for our money. What do you think? Is it a fair trade-off? Scroll down to leave a comment with your thoughts.
John Rosevear owns shares of Ford. The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
What Happened in the Stock Market Today
Stocks had a huge day, sending the major indexes to new records. Shares of Juno Therapeutics soared following a buyout report, and Ford slumped on disappointing guidance.
Why Shares of Ford Motor Company Fell 7% Today
Ford's 2018 guidance didn't sit well with investors.
Ford's Behind-the-Scenes Focus on Data
Ford’s recent partnerships and small-scale tests could bode well for the future.