That’s the question that Marketplace is asking, using the Honda Accord as a yardstick. In 1989, a Honda Accord with 98-horsepower, no ABS, crank windows and no A/C. In 1989 dollars, that would set you back $11,700.
A base model 2014 costs $21,955 in today’s dollars, or $11,500 25 years ago. Obviously, there’s a massive qualitative and quantitative advantage between the two cars, with the newer car offering better performance, safety, fuel economy and size.
There are plenty of economic factors (wages, cost of living etc), but as Marketplace notes, the cost per mile figure (when depreciation, fuel costs and maintenance) have stayed constant and financing terms have never been better. For those of you who were around in 1989 and able to chip in with your experiences
A 2014 Accord probably could be compared to 1989 S-class. If that even had 6 airbags, VSC, etc.
And how much maintenance did a 1989 car requir?
Let me just say, that is a very handsome Accord. Awesome color and I prefer those (EX?) alloys to either the base LX or the Sport wheels. Too bad you can’t get that exact car with a stick shift, in that color.
Best looking midsizer hands down, IMO of course.
And it appears to have a decently low beltline too!
That’s a huge part of the appeal to me, both looks wise and for driving enjoyment!
My dad bought one. It was black. I was only a lil kid back then, but it was miles ahead of the Toyota Corona and the Mitsubishi Gallant.
One thing that really stands out in my memories is how fast my dad goes with it.
The other thing is how often he mentioned it after we let it go on mid 90.
I just received my Accord in that blue 2 days ago. :) Mine has the Hybrid badge on the side (and the Hybrid wheels), tho.
So I agree it’s the best looking mid-sizer around.
True, but the problem is that many of our wages have NOT kept up with inflation and as you have to spend more for basic necessities, there is less funds available for transportation.
Volt 230 – you’re spot on. Inflation-adjusted cost of goods hasn’t moved much, whereas inflation-adjusted salary has been going backward, not to mention the ease companies laying off people.
My thoughts exactly. I would say housing and food have gone up far more than “standard” inflation, and then there’s gas. I vividly remember a cross-country roadtrip in 1998, stopping to fill up in rural Nebraska. Gas was 86 cents a gallon.
1998 is not a good year to compare to, for the same reason that 2009 isn’t. Remember when the Stategic Petroleum Reserve was tapped in 2000 because gas was getting close to $2 a gallon?
Real median household income today is about the same as it was in 1989.
So where have all the productivity gains gone? Good economic theory says good wage increases, without inflation and real gins is based on productivity. The US is surely more productive now than then, so where are those gains?
Lining the pockets of the plutocrats, workers in the US have work more hours and have less paid time off than any G20 nation.
(nods head slowly)
The gains are in the fact that a 2014 accord is about 2x the car that a 1989 was, and it costs the same.
Its bigger, faster, smoother, more reliable, safer and gets better mileage. A school teacher could buy an accord then and can buy one now. Getting a lot more for his/her money now.
True, still doesn’t explain how wealth concentration has increased so much in the period, so much so that it looks more like the situation seen in third world countries and not like nations the US is really competing with.
This right here. The beauty of capitalistic competition. Oh right, that’s supposed to be a bad thing. Where are the keys to my Lada?
No danio, not a bad thing. Does wonders. Somehow limits are needed though. Even here, cars have more equipment than ever before for less in real terms (have you read my recent reviews?). Also, the country has reached high income level growth and a shortening of distances between rich and poor. We have enjoyed growth spurts in the past, but that distance had somehow not been lowered. This time it has and in the end we are all safer and happier for it (not to mention safer) than ever before. The difference this time? As far as I can tell, greater government meddling. As always, the trick is in the dosage. Fine high wire balancing act, but that has been proven necessary (again, in MY best evaluation). Your opinion might be different. All is good.
Where is my Kombi? Oh, dead, can’t get it. The government killed it damn! Buy a Fiat Doblo/RAM Pro-something-or-other, miles safer, somewhat cheaper. Hummmm.
Twice the car for the same price, and it lasts twice as long.
I can remember the steady stream of used cars my parents bought over my childhood years (1980s and 90s). Now? My fathers car is 12 years old and my mothers car is 8 years old. Both run just fine with regular (and fairly indifferent) maintenance. The money they would have spent on cars has just been saved/invested. Boring, I know. But then again, they just spent 3 weeks in Italy – something that would have been completely unattainable for them in 1989.
But it doesn’t cost the same. It costs twice as much. 21K vs 11. The fact that some man presented as an expert on TV babbles on about “inflation adjusted” and whatnot, does not make 21 equal to 11.
Not when wages has barely changed. And particularly not when a much larger share of those unchanged wages now is mandated to be spent in all manners of other non discretionary ways.
Marcelo, those productivity gains have gone into more consumption in the US. Instead of buying cheaper cars, Americans buy about the same price car with more features. Fairly average Americans also buy noticeably larger houses. The recession slowed the trend a little, but the arms race to signal wealth/social standing continues.
http://info.stantonhomes.com/?Tag=average%20new%20home%20size
http://articles.chicagotribune.com/2014-06-02/business/chi-average-home-size-sets-new-record-20140603_1_home-size-home-builders-new-record
Actually, household income is slightly less, but much less than the 1990s peak. The problem is using the Bureau of Labor Statistics’ inflation indicator over long periods. The formula was changed in the mid 1980s, and that had the effect of reducing inflation by nearly half since then, saving the federal government hundreds of billions in inflation adjustments. The indicator also doesn’t include volatiles like food and energy which happen to be the biggest chunk of household budgets. Mark Twain was right about statistics.
The labor market is subject to more active management now than it wss 25 years ago. As “Tom the dancing bug” notes in his upcoming strip, unemployment isn’t a bug, it’s a feature.
The technology labor market provides a vivid example of how we’ve succesfully managed to keep the supply of labor flowing freely to maintain steady, sometimes declining labor pricing.
Before H1B visas started flowing like toilet paper, folks imagined that the tech sector would provide plentiful midddle class jobs to offset the decline in manufacturing. This would have been part of the national cycle of investment and innovation which fostered the technologies that generated these opportunities.
The market forces that lead a generation to re-skill for the surgining technology sector in the ’90s also saw many of those same folks investment wiped out when H1B visas kept flowing through the tech bubble recession.
Our tech sector is now very heavilly dependent on an imported contingent labor force. Market forces were and continue to be undercut. Don’t fool yourself, this is a vicious market distortion that continuees to benefit a very narrow rentier class and it’s been wildly succesful.
Now, back to cars …
Real Wages have been tapering off since the early 1970s, basically when we shifted from a Keynesian economy to a ‘free-market’ model that boosted corporate profit margins but left actual workers behind. The long list of reasons including globalization can be pointed to but specifically in the US’ case the fact that there has been a pro-business party beyond the measure of most other G20 countries has really impacted our economic system. When a country is fighting between a labor party and a center-left party their median wages are higher, productivity near or at US levels, and standard of living is higher. It’s basically a battle of economic systems in those countries where the center-left party is still more capitalist though accepting of socialist ideals. We instead have a mixture of socioeconomic status reinforcement and blind belief tying capitalism to a party that drives a message of fascist/nationalist ideology along with it which makes any discussion of practical economic changes near impossible.
TL:DR version: That car costs roughly the same because mass market goods like it need to be within the average citizen’s budget. It’s why the S-Class is so enormously expensive but a CLA barely costs more than a loaded Fusion. Thus because wages have remained depressed we have cheaper cars, it isn’t a benefit, it’s a bug that turned into a feature. Thanks Right-wing Capitalist ideology.
Minimum wage has remained about flat and everything above it has increased. If you are making minimum wage you have no business buying a brand new $20K car anyway.
Is the average person making twice as much as they were 25 years ago?
No. The average person’s wages haven’t changed much in the last 3-4 decades. The people at the top are doing much better, though. In the ’50s, the average CEO made about 20 times the wages of the lowest paid people in the company. Now, that number is around 400.
the average person’s REAL wage hasnt moved, but the nominal has.
The movement of nominal wage, is, of course the relevant measure for the question posed “Has the average person’s wage doubled in the last 25 years” when parity to a car that has seen its cost double in those 25 years.
Insurance cost is way up from 1989. Even a licence plate sticker for one year is up to $98 here in Ontario. Paid it this morning lol.
Back then cars were bringing technology like fuel injection, airbags, extremely durable engines/transmissions to the mainstream. Now it’s stability control, lane departure, radar cruise, etc… Once the tech is developed it becomes much cheaper to produce in large quantities and all models adopt the features. Funny how 7 years ago a terrible NAV system was a $3000-$5000 option for most brands. It wasn’t worth more than $300-$500 but it was the new feature so people had to pay big money.
My father, a non-degreed engineer and navy retiree, is making ~400% more than what he did in ’89.
My first response was anecdotal. Here is a more emperical example:
By using data from https://www.navycs.com/charts/ we can examine the pay rate for an E-4 with 4yrs of svc. This “grade” can be considered an “average person” because the “average person” can walk into a recruitment office and 4yrs later likely be an E-4. In 1989 the rate was $1103, in 2014 the rate for same grade is $2555. The 2014 rate is 2.23 times what it was in 1989. Assuming (and you’ll have to go with me on this) that the military pay grades are (very) roughly in step/competetive with the private industry then the answer to your question is:
YES, the average person is making MORE than twice as much as they were 25 yrs ago.
No…but you can afford a lot more stuff for the same money.
Change the year to 1999 (many – not all – cars were better/more durable than now in my lonely opinion – even 1994 Acura Legend, yo!), OR 2005 (ditto on what I said in prior parentheses – 2005 Acura RL, yo! 2005 Lexus LS430, BMW 3 anythingSeries, Acura anything) weigh median salary against median new car transaction price, and the result may be dramatically different.
Just a supplemental point regarding new car quality vs that of a decade ago:
Many of us “grouches” have been saying it for a long-time, yet few believe it, and now it’s becoming more apparent by the day (even MSM is on to it) – we hit peak quality between 1995 and 2005, depending on manufacturer’ and are falling down fast (and it’s NOT about electronics):
“Reuters) – Engine and transmission problems caused quality in the U.S. auto industry to slip for the first time in 16 years in a vehicle dependability study of owners of 3-year-old cars and trucks, falling from last year’s record-high levels.”
“Increases in Engine and Transmission Problems Reported
Engine and transmission problems increase by nearly 6 PP100 year over year, accounting for the majority of the overall 7 PP100 increase in reported problems. The decline in quality is particularly acute for vehicles with 4-cylinder engines, where problem levels increase by nearly 10 PP100. These smaller engines, as well as large diesel engines, tend to be more problematic than 5- and 6-cylinder engines, for which owners report fewer problems, on average.”
http://autos.jdpower.com/ratings/2014-Vehicle-Dependability-Study-Press-Release.htm
“Grouches” have been saying “they don’t make ’em like they used to” since at least the introduction of the Ford Model A. I’m skeptical that it’s suddenly true.
I wouldn’t know. I was born in 1976.
Query: Would you rather have a 1994 Acura Legend, 2000 RL or Acura RLX, all being brand new?
1995 BMW 3 Series, 2003 3 Series, or 2015 3 Series, all new?
Legend over all pretenders and E36 over 46 and F30 (36 vs 46 is tough but I gots to go with what I know)
If the question included which I’d rather have a high speed accident in, which one’s exhaust fumes I’d want to breathe in from the atmosphere in 30 years, and which one I’d expect not to rust away within single-digit years, which would leave me with more gas money, and which one I considered more affordable in inflation-adjusted-dollars, I’d go with the new one.
JB, I had no idea that the 1994 Acura Legend, 2000 RL, 1995 BMW 3 Series or 2003 3 Series were so unsafe in collisions, dirty in terms of emissions nor so prone to rust?
Wow. The more one learns.
@Deadwieght
The newest one of each, as a practical matter. Do not confuse the makers changing the cars due to what the market demands with them making them somehow worse.
I would *love* to be able to buy a brand-new 2003 e46 3-series, because that car was more oriented towards enthusiasts. But I am under no illusion at all that the 2015 3-series isn’t a better car that will be more reliable and cost less to own over the long-term.
Legends have been nearly extinct in the north for a good decade. I know because I like them, and I notice them when I see them. I rarely notice them anymore. They were rusty cars at least ten years ago. As time went on, more recent Japanese cars would go longer before you noticed them rusting, except for Mazdas.
There’s no denying that the newer cars make more power, use less fuel, and are easier on the environment. And if you don’t believe me on the crash safety, why don’t you go ahead and see if BMW can get an E36 to pass today’s minimum crash standards?
Don’t get me wrong: in terms of driving enjoyment, I prefer the older cars – of the 5 vehicles I’ve owned, only one was more recent than 1999, and that was a motorcycle – but there’s no denying that the new ones are objectively better at doing car things like getting people and cargo from place to place quickly, comfortably, cleanly, safely, economically and efficiently.
Juniperbug: “Grouches” have been saying “they don’t make ‘em like they used to” since at least the introduction of the Ford Model A. I’m skeptical that it’s suddenly true.
I am. I think there was a confluence of factors that caused peak quality in the late 1990s. Search TTAC for “Fat Toyota” for one explanation that I found credible. tl;dr, Japanese quality and overengineering peaked, then the strong yen forced them to cheapen. And the rest of the market followed.
I’m still driving my 1998 LS 400 and marveling at how well it was put together and still is with over 250K miles. I often think to myself that they don’t make them like that any more, especially when I go from it to my ’12 Miata or my wife’s ’12 Prius or my ’04 F150.
You really ought to look at that more closely.
JD Power claims that the increase in problems was the first time that such an increase had occurred. That increase was not part of an ongoing trend, but a slight reversal after many years of decline.
Go back and compare the VDS results from several years ago to the 2014 report. You find substantial improvements across the board since then. For example, the leader of the 2006 VDS was Lexus, with 136 problems per 1,000; in 2014, Lexus was again the leader, but with 68 problems per 1,000. Its winning 2006 score of 136 was close to the industry average during 2014. This result bears no resemblance to your theory.
And a lot of “problems” today are issues with people not understanding how various high-tech user interfaces work. They are not things that strand you on the side of the road.
Interesting. I think, by 2000, a lot of problems that first began with aggressive emission controls in the late 1970s had been solved; and there was enough experience to do them with very high reliability. However, even higher fuel economy mandates from the government are driving manufacturers back to the bleeding edge of technology: turbo chargers and direct injection for example. The experience base with these systems is not great enough to make them as robust as systems that were mature by 2000. The higher injection pressures required by DI make the entire injection system — high pressure pump and injectors — much less fault tolerant. And the question of how to clean the crud from PCV systems from intake valve stems — now that they are not bathed in fuel from the injectors — has not been solved. For example, for the Ford Ecoboost engines (which are DI) Ford Motor specifically recommends against the use of treatments like “Sea Foam.” While they may clean the intake valve stems, burning all of that stuff up along with the fuel can overheat the turbos, leading to turbo bearing failure. Ford’s suggested repair? Remove the heads. Yeah, right.
Large diesels are in the same category, as there is not enough experience with the new DPF and cooled EGR systems to ensure robustness and, of course, the common-rail injection systems operate at much higher pressures, making its components less fault tolerant.
So, we’re back in a “second wave” of technological development in search of more power from less displacement, and more fuel efficiency.
It’s interesting that, in the Prius, Toyota has avoided making its engine particularly “high tech.” No DI, no turbo charger. Even though using these techniques probably would result in a smaller displacement engine that develops equal power, but weighs less.
Toyota’s D4-S retains the port injectors. My FR-S has 8 injectors: 4 direct, 4 port.
Not a chance that mid-’00s BMWs are less reliable than current, with the exception of the original 6cyl twin-turbo. That ENGINE was a disaster, but pretty much everything else was better than what came before, and continues to be. I suspect that Acuras are just as good as they ever where, they are just relatively less desirable than they once where. Same with the Lexus LS – nobody seems to want them anymore, IMHO because they are no longer dramatically better than the Germans, even if they once were. The Germans are good enough now, so no one wants the downside of them (booooring, and expensive).
As far as the wage issue – I think JuniperBug already said it best. A Hynudai Accent today is a better car in every way than a Mercedes was when I was a kid. But everyone still wants a Mercedes.
Too many people seem to think success should be just handed to them for doing the same old thing. Better yourself, then get a better job! The world owes you nothing! Though the liberal commie in me thinks the world owes everyone a basic level of food, housing, and medical care. But you are on your own for transportation.
Last time there was an article on the luxury sedan segment, the LS was only outsold by the new S-class. While sales aren’t what they once were, the LS is still better regarded by the market than the A8, 7-series, Panamera and others. The problem is that people buy large SUVs and CUVs instead.
The only problem with the current LS is that it’s been around for 8 model years and still has a couple more to go. Anyone who wants one already has one, and it’s not like they wear out and need replacing.
This right here.
Yesterday my brother sent me a photo of a transmission, for his 1999 Acura TL. He’s going on trans #2 for this car. The car has 250k or so, maintained by a fanatic. Bloody close to showroom.
He and his wife could buy anything reasonable, but they just keep this car going. Pretty much all the newer ones would do for him is integrated bluetooth….which isn’t a reason to spend 30-50k.
Keep the rubber bits in the suspension fresh and it drives like new. Whatever repair costs there are, are still less than the TAX they’d pay on a new car.
My 03 BMW (309k) agrees.
If he’s comfortable with removing his audio headunit himself, point your brother to factoryradioservice.com. The guy does excellent bluetooth and aux input retrofits to older car stereos for about $150. I had him add bluetooth and aux in to the stock head unit of my 2000 LS400 – it works and looks flawless.
My 85 LeBaron GTS sold new for something like $14k (I bought it 3 years used).
Today that’s worth $31k, which will buy you a comparably-sized car, but there is no comparison in features, economy, performance, or safety.
Similarly, my 71 Pinto cost $2000 when new (again, I bought it quite used) – equivalent to $11700 today. That might get you a Nissan Versa Note, which is an infinitely better car.
What’s NOT keeping pace is the cost & quality of a college education.
A fully loaded Ford Probe GT in 1988 (as a 1989 model) would set you back about $18,000.
That would get you power driver seat, power windows with driver express down, power locks, trip computer, DIC, full instruments, adjustable suspension (can’t remember the exact terms think soft, normal, sport), power mirrors, front and rear wipers, rear window defrost, quasi-climate control push button HVAC with full rheostat fan, AM/FM cassette, CD sound system with subwoofer, four wheel disc ABS brakes, cruise control, rear defrost, sunroof (manual), 15″ rims with performance rubber, an intercooled turbo charged 4-banger with 145 wheel HP and 190 pound feet of torque at the wheels, fog lamps, center armrest, spare tire (since this is becoming an option these days), cargo area cover (since this has also become an option these days), tilt wheel with tilt instrument cluster, full gauges including boost gauge.
Today that same car would sell for about $36.5K in inflation adjusted dollars, new.
The Probe kind of seems like a ripoff when looked at through that lens. Very well equipped for back in the day – but not even close.
I actually shudder to think that in adjusted dollars I bought $36.5K worth of car — I would be very hard pressed to be convinced I should spend $36.5K on a new car today. Funny how your priorities change.
This is a real annoyance of mine. You get all kinds of people complaining that cars today are so expensive. Oh, if only they made an affordable stripper of a car that today’s working-class stiff could enjoy like back in the good old days!
It’s nonsense. While wages sure have stagnated, in real terms, cars have never been more affordable. You could nearly buy a car today for the same purchase price as that $11,500 ’89 Accord, that will be far superior to that car.
I think the real issue is that all cars have gotten so much better, but people are chasing the prestige. In the 80s, a Ford Escort or similar was a cramped, unsafe, uncomfortable traffic-hindering slug, whereas today’s Hyundai Accent or similar will do everything a small family needs, and far better than a more prestigious car in the 80s would have. But to the average consumer whore, “It’s still just a Hyundai.”
And so they complain that they can’t afford a Mercedes, even though a base Mercedes, the 190E, in 1989 cost roughly the same in *unadjusted* dollars as a CLA does today.
Just like with houses, electronics, and other consumer goods, people decide, with the help of media brainwashing, that they “deserve” a certain level of prestige and luxury, and when they can’t afford it, decide that the deck must somehow be stacked unfairly against them.
“It’s unfair” is a lot easier to say than, “I should’ve worked harder.”
….It’s unfair” is a lot easier to say than, “I should’ve worked harder.”…
Well, that may be true for some, but I am willing to bet there are far more who have busted their butt and yet didn’t see the reward. With the continual recession the bosses quietly whisper “be grateful you have a job” as they drive home in their Lexus. Meanwhile the working stiffs bust their humps to make sure they are not the ones to be chopped next Friday. Productivity is at an all time high because they are “working harder”. Yet all the reward is kept by the fat cats. Nothing is trickling down. ZERO. I get up at 4:30 AM and get home by 7 PM. There is no more blood to give. And I am not alone.
If you are not getting where you want to be at your current job, change jobs. Yes, that is hard. You might even have to move. You have to take risks to get ahead. If that is too hard, then be content with what you have. Life is hard.
Life is what it is, no matter who or what you are. Does the mouse complain about being the lowest on the food chain? Does the 90%+ of the world’s human population who’s worse off than you keep you up at night because of the unfair advantage you have? Would you rather live at other points in time and geography where you not only had to give most of your earnings to a king, but you also had to crap in a hole outside in the dark?
What the 1%ers have been doing the last few decades is despicable, but my running up debt by living outside of my means or whining about my situation isn’t going to fix anything. Yeah, as a millennial, I have it harder than my parents’ generation in a number of ways, but at the end of the day, most of us still have it pretty good, and there are still lots of opportunities to better ourselves and our situations if we get off of our asses and think a little bit outside of the box. Sadly, not buying more car – or other consumer crap – than you need/can afford is considered “thinking outside of the box” these days.
You’re either part of the solution, the problem, or the scenery, and unlike today’s schools, life doesn’t give you a trophy just for showing up.
” I get up at 4:30 AM and get home by 7 PM. There is no more blood to give. And I am not alone.”
You should be able to get home quicker than that in a C7 Corvette…
danio3834 = lifecoach for hire.
I’ve been six days a week, 70+ hours for as long as I can think of. I’m 46 years old. I feel much older at times. Have to agree with you on EVERYTHING you wrote to both Golden and Juniper.
Cheaper in real terms, and MASSIVELY cheaper when you account for the added content. And luxury care are relatively MUCH cheaper.
As I have mentioned before, my ’88 MB 300TE was just short of $49K in ’88, which would be over $98K today. For $49K back then you got plastic unheated seats, a 177hp I6 with 0-60 in about 10 sec, a 4spd transmission, no power mirror on the driver’s side, and a tape deck with 4 tiny speakers. The 2014 equivalent starts at only $58K, for only a few grand more than the adjusted price of the ’88 you can get an insane AMG wagon.
Go back another 5 years and a stripper e30 318i cost $18,500, for which princely sum you got 110hp, a 5spd, no sunroof, no A/C, and no radio at all. That is $41,500 today, when a BMW 320i which will blow it into last week, but is considered a tad slow today, only costs $32k, and has A/C and a decent stereo with MP3 etc. Even a base 4-series 428i is only $40,300.
I know a bunch of folks are going to whine about wage stagnation, but that is YOUR issue, not the cars. Cars are cheaper than they have ever been.
We live in a golden age.
My family had a 1987 Accord LXi, which would have cost more than the base model you describe. That was really a terrific car but to confound this comparison, that Accord was probably more comparable size-wise with a new Civic. The new Accord is a much larger and more powerful car. So, apples to apples, you’re really comparing an $18,000 Civic LX today to a $12,000 Accord in 1989… and you’re still talking about a car with standard features we couldn’t have even conceived of back then.
Personally, I think cars today are cheaper and better than they were back then. A base Civic in the late 1980’s had no power steering (on the CRX and hatchback models), no safety features (relatively speaking… no ABS, airbags, the door panels were thin, etc). Even a new Nissan Versa today is a larger, more comfortable, and safer car than a Civic from 1987.
Toss in standard features like BlueTooth (science fiction in 1989), smart phone integration, front and side airbags, 15″ inch wheels as standard, ABS, traction control, 4-wheel disk brakes, 10,000 mile oil change intervals, and more and it’s hard to even compare what you get for the money. Back then, A/C was still optional or even dealer-installed. Is there even a car offered today without standard air conditioning? Oh, and even into the 1990s warranties were shorter and didn’t cover as much as they do today and corrosion resistance was more of a fantasy than a reality (I grew up near Detroit).
Cars today are massively better than they were. Just the addition of safety features such as active head rests, air curtains, ABS, traction and stability control make them much better and safer than cars of even just over a decade ago.
When I first started driving power steering, power brakes and disc brakes were upgrades/options. And I remember when seat belts and head rests first became available.
However some equipment is now considered mandatory that I am more than willing to live without, including power windows and door locks.
In 1976 my Corvette Stingray cost, if memory serves me $10,600 Cdn. In reality it was a ‘crap can’, underpowered, cramped, with terrible materials and laughable ergonomics.
What has changed is that the cost of housing has escalated out of control. At that time you could buy a nice house in the Toronto area for less than $45k. Now the average price is over $650k.
Factor in the massive increase in insurance rates and gasoline and the ‘car culture’ is no longer part of life of the majority of the new generation.
Also the cost of education has criminally increased. At that time you could work during the summer and earn enough for books and tuition. That is now largely unattainable.
And to Steve, I purchased an ’86 Accord EX new. At that time Honda still did not deliver cars with factory air, you needed to have it dealer installed. I also had negotiate to get a 3rd brake light installed.
When I think a midsize frontier started below 10k in 1999, and compare it to now, yes.
Wages haven’t doubled in that time, but manufacturing processes have made an extremely high degree of technological advances. A vehicle made in 89 had a lot more steel and a lot more redundancies in an effort to create reliability. A vehicle today has a higher degree of plastic, cheap materials, and thanks to advances can build a chassis that is made to the bare minimum strength required so no extra material is used. They can combine components to save money by eliminating methods of replacing smaller components.
The bigger problem here is that manufacturers build cars that are cheaper (after calculating inflation) to build, but expect the consumer to be willing to pay the same amount when our wages haven’t evened out with inflation. GM can sell a Tahoe to the local police department for 25k, yet they expect the consumer to believe the escalade is worth an extra 65k in materials?
See the fallacy?
I don’t get a Pontiac, Oldsmobile, Buick engine with my BOF convertible that is as smooth as butter on the solid rear axle. No I get corporate parts bin conglomerates with designs that distinguish themselves by finding who can make the largest center console, or rake the windshield far enough back to touch the drivers forehead, or how about a loss of visibility to top off the design.
Manufacturing processes, design, and parts bin usage have made vehicles cheaper than ever to produce.
If this is true, why did vehicle weights climb drastically over the last 25 years? Why does a new VW Golf weigh nearly half a ton more than an ’89 while costing fewer inflation-adjusted-dollars? Why does it hold up far better in a crash while offering more content and performance?
How is wage stagnation relevant to complaining about a car industry that offers far more product for the dollar than ever before?
I bought a brand new Accord SEi coupe in 1989, and paid about $18,000. The SEi was the top trim level, probably comparable to the EX-L today except the SEi was pretty rare and came in a couple of cool colors that were not available on the rest of the trim lines.
A loaded EX-L maxes out at about $34k so inflation wise the cars are priced about the same, except in 2015 you can get a V6, and the engineering, emissions, and safety features are much more advanced.
The big difference between 1989 and 2015 is that there was nothing else comparable to the late ’80’s Accord as far as styling, engineering, reliability, economy, and value at that price point. Nothing. People were on waiting lists for Accords and at one point would actually follow car carriers into the dealerships and try to buy the cars while they were still on the truck. Honda dealers were actually convicted for bribing Honda of America execs to get more dealer allocations. That generation of Accord was really groundbreaking and created a surge of demand for imports that has never really let up.
The domestics had nothing that could hold a candle to the Accord in the mid-size category. Nobody could objectively compare anything the domestics were building to an Accord, even in Michigan where I lived at the time. The quality and style of the Accord made it socially acceptable to buy an import even in the back yard of the Big Three.
Today we take high reliability, a solid build, and good design in virtually every car for granted, but that was not the case in 1989. Compare a 1989 Accord to a Cutlas Ciera, Ford Tempo, Chevrolet Celebrity (even the Eurosport) and you can get an idea of where the rest of the market was. Fairly bad cars were the norm. The Accord inspired a sea change in automotive expectations.
By the way, I loved that SEi. When I sold it with 190k miles it had never used any oil between changes and was still a pleasure to drive.
Lol, as if inflation numbers aren’t fudged out the wazzoo, as if wages have not stagnated for 40 years and been going backwards for lower tier workers, as if competing costs haven’t crowded out car ownership. This assertion that cars cost the same and are so great now borders on propaganda. I spent my loaded 328i money propping up an institution of “higher learning” with an endowment over 10 billion dollars. I drive a 1997 3400 dollar tbird and will be driving it for at least the next 5 years…that is until I’m over 35. Point is, “costs” of a new car mean nothing when your key demographic is flat out broke and indebted. Its the same for every single person i know my age, not a single one if them drives a new car or sees a car as a status symbol. Heh, I’ve had my say, don’t get me started on the housing market or the fed.
No one forced you to be a poetry major.
I have multiple advanced degrees in physics and engineering. No one forced you to be an out of touch old man who grew up as one of the most entitled and well-of persons in history and because of that you couldn’t possibly see the shitstorm your generation left behind for your children, but thanks anyways, we won’t miss you when you’re finally gone.
Not dead yet. Haven’t lost my sense of humor yet, either.
How many poetry majors have you actually met that actively lamented their lack of job prospects, then directly blamed them on their lack of getting a “real” degree? Or do we all just enjoy creating strawmen to show how correct our own ideologies are?
At least I got the joke.
It took me from 1979-1990 to pay off my college loans. In that time I acquired a master’s and doctorate, adding to the pile I owed.
I worked a 60 hour job and a 15 hour part time job. I bought a house and got to see a little bit of the country and the world.
Once those priorities were settled, I married and started a family.
I’m no hero – you do what you got to do. I walked away from a great, secure job and setting to stick my neck out on a risk. It paid through and I know I’m lucky and thankful.
Here in my mid-50’s I believe I have one more swing at the bat…I plan to retire from public service and put 10 years in private sector. While none of my jobs have been particularly well-paid, with insight, hindsight and planning we will be comfortable as I head towards the endzone.
You do what you got to do.
Except we are on track to sell 16 MILLION cars this year. At an average price of somewhere in the low $30K’s. So that means there are at least 16M people who feel confident enough in their lives to buy new cars. If you are not there yet, well, be patient, you probably will be. I didn’t start buying new cars until I was in my early 40s, with one exception (which was mostly paid for by mileage from my employer). I bought a TON of $5K used cars though. My folks did not start buying new until they were in their *50’s*.
Really the best bit about new cars being so much better is they make WAY better used cars too. Or you can just keep them longer and really get your money out of them.
You can’t look at just the sales numbers. They are a lie. They are catch ups of pent up demand after yearsbof stagnation, they are heavily leased, and they are heavily subprime lending at longer than ever terms. Current sales trends are not sustainable.
nickoo,
According to you:
– Auto sales are a lie.
– Inflation numbers are a lie.
– You don’t know a single Gen Y person who drives a new car
– careful analysis of the costs of an Accord today vs. 25 years ago are “propaganda”
OK, I’ll bite. From what institution of higher learning with a $10B endowment did you graduate?
Haha, I’ll give you a hint. I make a check out to g*# #a*( )(*&^y )($s, (a well known institution of higher learning) every single month because they were “kind” enough to loan me the money to cover the cost of their tuition! Needless to say, whenever they call/send flyers asking me for donations, I not so politely inform them I’m already donating on a monthly basis.
There is some catchup, but I think it is more simply that the economy IS improving.
How does leasing even matter? A lease just means you are guaranteed to be in the market for a new car again in 3yrs. Which for many people, is about when they are going to get the itch to buy a new car anyway. It lets you get a little nicer car for the same monthly payment, and takes a lot of the mystery out of what is going to happen next time. I am more into buy and hold, but that is really more that I know exactly what I want, and once I have it I am happy with it for a long time.
As for schools – I graduated Law School in into the previous recession in ’94 and could not BUY a Law job in my area. As I did not want to move, I fell into a different career path. But I was smart, I did not go to “Big Massively endowed super-douper expensive school”. Instead I went to very reasonably priced state schools. And for Law School I literally went to the school willing to give me the best scholarship. Maybe that affected my job prospects, but I know a lot of folks who went to Ivy League schools who could not get a job either. So I made it through 8 total years of school with a manageable amount of debt. Still a fair bit for 20-odd years ago – my family contributed minimally.
So ultimately, I don’t really have THAT much sympathy for the youth of today. I agree that college costs are out of control, but ultimately that is because the students WANT those palatial amenities.
While I am sympathetic, I think you have conflated two different things: the cost of higher education (which has greatly outpaced the rate of inflation) with the cost of a new automobile.
This thread is about the cost of new automobiles.
As the father of 3 “millenials,” I am greatly concerned about the situation you describe. It will have long-term adverse consequences, with respect to such things as household formation, child-bearing and so on.
Oddly, the government, which is so anxious to regulate things like the price of cable TV or high-speed Internet, has taken a hands-off policy towards higher education.
I am a graduate of a university that has the highest endowment, per capita, of any university in the U.S. Yet, my university still beats the drum for more “annual giving” and still charges super-high tuition. When I visit the campus — a place that struck me as a country club when I attended in the late 1960s, it is even more unbelievable in terms of amenities that we never dreamed of. Such things as a new dormitory built with construction techniques, materials, etc. that were copied from what was used to build the classic “schoolboy gothic” dorms in the late 19th Century . . . a crew boathouse that rivals the interior of the Los Angeles Athletic Club in terms of surface finishes, etc.
Sorry, I got a little worked up. When I look at the cost of living, medical insurance, housing, student loans, rent (very high in my area in SoCal, but it’s where my job is, so I don’t have much choice!) combined with job insecurity costs (I lost my old job when a contract got cut, had to move across the country for this one, out of pocket.) I find articles like this one insulting…To me, it is the same as when the old fed chief proclaimed that there was no major inflation because the price of i-pads had gone down.
Inflation as a whole is a flawed metric that purposely excludes energy and food costs, two critical categories that everyone must use, so in fact, if we look at actual inflation, then the costs of cars are probably nearing decade if not all time lows!
I think instead of using “inflation” as the metric to compare the “cost” of cars, it would be a much more valuable and eye opening study to determine *affordability* of cars by comparing the average median salary of a first time car buyer at an assumed 30 years of age, subtract average median debt load, factor in increased costs of living, and then see how much money that person has left over for a car payment. The median age of the average new car buyer is something like 50 years old, my belief is that the reason for that is because most of us who are younger are quite behind in most aspects of life of where previous generations were in life at the same age.
nickoo,
Look around, there are companies that will hire based on your degree in completely unrelated fields. Some of us here have been lucky, others not so much as far as stable career fields. However, almost all of us have had to “make our luck”. If you do not, your income will remain stagnant. Go look around.
We all wish you the best of luck…even the ones who sound cynical.
Why would you find this article insulting? Cars are cheaper than ever. That you’re having trouble finding a decent-paying job, and that you’re paying for a massively-overpriced education have nothing to do with the car industry.
I’m 30, have no college degree (but am slowly working on one after having gone down a number of different career paths), basically serve drinks for a living, live north of the border where taxes are much higher and everything from gas to cars to food costs about 20% more, while average income is lower, I pay $1200/month for a 640 sq. ft. apartment, and even I could buy a basic new car, in cash, today if I wanted to. And it’s not because Mom, Dad, or anyone else is helping me pay the bills or gave me any money when I moved away from home.
It comes down to how you approach life, your spending, what opportunities you jump at, and of course: luck. But you would’ve had a hard time convincing me of the ROI on a 5-6 figure education that didn’t basically guarantee an equivalent salary right out of school, before I would’ve agreed to sign up for that deal.
I’m older than you and further along the expense path, as well, and you claim more knowledge and dispense it in a haphazard way than you really should, IMO.
Experience is the best teacher, bar none.
You want to talk about living expenses and how others here are falsely crying “woe is me?”
Let’s consider the following, shall we, assuming we will get married and/or co-habitate with a s/o at some point and have ONE child – here are the BASICS of modern loving costs to have a purely middle of the pack middle class lifestyle:
Housing costs – 15% to 35% of most peoples’ incomes, varying mainly based on location. Let’s call this $25,000 per year for the sake of simplicity, by the time mortgage payments, property taxes, maintenance, utilities (water, electricity, gas, etc. are included).
Medical insurance – You Canadians get hit in your taxes, and have, IMO, modest coverage (but at least everyone has it). Down in the U.S.? Decent (not great) medical insurance is 1/3 to 1/2 as much as housing for most, In my neck of the woods, a family of three to four with decent limits and choice of doctors is going to pay, at minimum, $800 per month (and often much more) by the time annual deductibles, monthly premiums, co-pays, etc. are totaled. Let’s just call it $10,000 a year.
Want/need two cars? $200 to $300 per each, monthly, plus insurance, for average cars. Add $200 each for gasoline. Boom. That’s $1,000 per month, or let’s say $10k to $12k annually.
Do you like your kids schools? Well, this sucks if you don’t, because a decent private school will cost $8k a year (and a really good one $15,000 per year – and this is for k-8), Don’t believe me? I don’t blame you. Check it out, though. Wait until college tuition strikes.
Okay, we got housing, medical insurance, transportation covered, with the potential of private school for one kid. And we’re reasonably talking $45k to $53k OF MOSTLY POST-TAX INCOME, OR $80,000 OF PRE-TAX INCOME.
FOR THE BASICS.
But wait there’s more.
Food, clothing, retirement savings (if one is so fortunate), other taxes, fees, etc. Call it another $1,000 per month (and I’m being conservative, because decent quality food can can cost $150/week alone).
That’s another 10k annual of post-tax income, or at least 13k of pre-tax income.
Okay, we’re up to 80k of pre-tax income in a public school and nearly 90k w/1 kid in a decent private school k-8.
Have any hobbies, social life, etc.? Boating, camping, club racing, golfing, bikes, football games, eating out, concerts, etc?
Add it to the pile.
You need 100k of post tax income (120k to 130k of pre-tax I come) to have a decent quality of life in most areas of either the U.S. or Canada.
This is for a relatively comfortable, NOT luxurious, middle class standard. And then you need to save for retirement, too.
God forbid you or someone you take care of/love have/has a lapse in medical coverage and and serious accident or illness, bro.
You think you can skirt a lot of this by living some frat boy existence, renting cheap apartments, eating sale price food each day, wrenching on old cars and skipping insurance, never settling down or having a steady relationship with a s/o with even 1 kid?
Good luck and bon voyage. Let me know about your life’s regrets at age 55.
I am continuously entertained by the naive cheering section of mostly young males cheering for the inexpensive luxuries we have today, having no clue what they’re going to face ultimately (a stark choice and contrast and fork in the road), when they are completely clueless of what it is they will inevitably face.
Private schools? Two newer cars with payments? That’s pretty luxurious by average standards.
Yes, the good life costs a lot.
Tell you what, Danio, back out the k-8 private school costs for the ONE child I included above (for those who involuntarily are trapped in a bad public school district, paying private school tuition is cheaper than moving, oftentimes) – Oh WAIT – I already did back those costs out by giving two scenarios.
As for the “two new cars” whine, who said they were new, and how much “car” is $200 to $300 per month really going to get you, anyways? Have you checked out USED car prices lately?
(Besides, 1/2 the costs I formulated regarding two vehicles is gas @ $50 per week for each – which is low for many – and then insurance, etc.)
You call that luxurious?
DW,
So what you’re saying is that in order to live a nice life with two cars, a kid in private school (I believe you on the costs – Dad paid $6k/year for mine and my siblings’ 20 years ago – he’s a machinist by trade), and a $2,000+/month mortgage, which buys a lot of house where I live, a couple would need to earn about $65k gross per annum each?
And a bit of hard work and thinking outside of the box, including not having kids or mortgaging yourself for life until you’re ready, won’t get you there?
And that’s relying on the numbers you supplied. Personally, I think that private school is a luxury that isn’t worth it if you can’t comfortably afford it. $2k/month will buy you a good bit of apartment or house. If I were willing to live 1-1.5 hours outside of the city and incur the transportation costs involved, my current $1200 rent would buy me a 2 story house with 40,000 sq. ft. of land at today’s interest rates. In some places in the US, it would buy much less, in others much more.
I’ll repeat what I said elsewhere: you’d have a hard time convincing me of dropping 5-6 figures (per kid) on a university degree, knowing it wouldn’t get a decent wage out of school. There are other ways to get an education and a trade without it at that point.
I know that wages are stagnating, I know that economic conditions are harder than they used to be, but it’s still possible to have a decent life. Maybe skip the premium-priced branded clothes, the I-phones for the kids every 2 years, and avoid excessive debt, and things can be just fine. My dad managed to live well outside of what one would expect a machinist immigrant to manage, and it was due to a) working his ass off, while being very competent and looking for the right opportunities, and b) Avoiding the consumer mentality, while teaching his wife and three kids to do the same.
Bonus: his kids learned to be financially responsible early on, especially in the context of the spoiled private school babies around us. None of us have any debt, except for my sister, who’s got a year or two left on the mortgage on the 14,000 Euro apartment she bought in Spain.
Economically, we still have it better than most of the rest of the world. And there’s nothing keeping us from going out to make our fortunes in those other parts of the world if we find conditions too terrible here, either.
“…all research indicates that disposable income in North America peaked sometime in the early to mid 1970′s.”
Not according to the St. Louis Fed:
http://research.stlouisfed.org/fred2/series/A229RX0Q048SBEA
Juniper –
1st, let’s not get sidetracked by the private school tuition thing too much, but I agree with you on its cost/benefit analysis being not so great UNLESS (a) one happens to live in an underperforming, or maybe even not so great, middling public school district or (b) one desires to send to their child/children (and again, I only used cost figure for 1 child, and I backed that expense out in an alternative COL figure) to a religious affiliated school.
Okay – BIG PICTURE:
Many more Americans who are deemed to be in today’s “middle class” are struggling to make enough to cover decent food, utilities, transportation costs, mortgage/rent payments, medical insurance, education/tuition expenses (their children & their own), clothing/general insurance/maintenance, and, if they are in the minority, fund a retirement with whatever savings they have left over at the end of each month (statistically, company provided 401(k) and other pension/retirement funds are disappearing), etc.
In the 60s and 70s, the fat portion of the middle class curve could eat well, cover their mortgage/rent, transportation costs, medical insurance, education/tuition costs, etc., ON THE SALARY OF ONE BREAD WINNER.
In other words, if you were middle class, only one parent had to work out of necessity to cover these costs.
The means to cover the same expenditures TODAY, even adjusting for hedonics, since that era, has been driven by two main factors;
1) Women have joined the workforce in droves and now have as high a labor participation rate as men,
2) Debt, in all of its forms, is being used far more prolifically and in a far more vast array of methods, to “cover” these cost (very few people even had credit cards in the 60s or 70s).
I am not going to get more technical than that, but, even adjusting for hedonics, it takes the average middle class family (a) two incomes (versus one), and (b) the use of much more debt, to cover the same basic costs today as it took 50 or 40 years ago in North America.
“As for the “two new cars” whine, who said they were new, and how much “car” is $200 to $300 per month really going to get you, anyways? Have you checked out USED car prices lately?
(Besides, 1/2 the costs I formulated regarding two vehicles is gas @ $50 per week for each – which is low for many – and then insurance, etc.)
You call that luxurious?”
I said new-er cars. If you’re making payments, the car’s going to be within a financeable age range. Some costs could be cut by replacing one vehicle with an older unit. We’re talking ends meet, not luxury. That being said, $600 a month for two car payments isn’t unreasonable, but if this family couldn’t make ends meet, some expense could be cut here.
$600 a month on groceries is high for 3 people. Again, ends-meet, not luxury.
The housing costs of $25k a year are on the high side considering a 30 year mortgage on an average home price of $188k.
We’re already put the private school thing aside.
It seems like you have higher than average expectations of a what a basic, non-luxurious lifestyle is. If that’s your standard fine, it’s similar to my own, but the difference is I’m not crying about the expenses because I know I could live cheaper if I chose and still have an OK lifestyle.
Danio, 188k is NOT going to get you anything remotely close to a solidly middle class house, jn a solidly middle class school district, in a relatively safe/secure section of a city, in a HUGE SWATH (population wise, or, where people happen to congregate in larger numbers) of the nation.
Try something closer to a 288 median (and that’s WAY light for most MIDDLE CLASS areas of California, New York, Massachusetts, Washington, basically the east coast, basically the west coast, now the Dakotas and Montana, Minnesota, Wisconsin, Illinois, non-desert areas of Texas, etc.)
$600 as a monthly food budget (for decent quality food) for a family of three, especially if people want to eat out once a week at a halfway decent restaurant (a “middle class” thing), is not on the high end.
Car insurance alone – not car payments, gas, maintenance, etc. – is $60 to $100 a month per vehicle for almost anyone living in a major city or even moderately large suburb.
We weren’t talking about “making ends meet,” but a middle class lifestyle (preferably a sustainable one, where debt isn’t swallowing the ship).
DW, that’s probably the exact reason why so many people, who can, are cashing out and moving to the wide-open spaces of New Mexico, Arizona, West Texas and Nevada.
It sure is great for the real-estate business, but a nuisance for the long-time residents of these areas to have all these starngers move in with their sophisticated, sissyfied, metro-sexual, big city ‘tudes.
As Arthur Dailey says below, housing costs went up because women joined the work force, not the other way around. There’s only so much land, and capacity to build on it. When women’s contribution to the household income caused it to skyrocket, the demand for that land and real estate went up. It doesn’t take an econ major to figure out what that did to the prices. As a result, two incomes became the new normal to maintain the lifestyle that people were living. I suspect this point is glossed over because some people would construe it as a negative consequence of women leaving the home, and of course we can’t ever say anything negative about Woman Power ™. It’s accepted enough in the academic field, though, that it was mentioned in an Intro to Real Estate textbook in one of my B. Comm. courses.
The fact that there’s more debt than ever doesn’t isn’t necessarily evidence that things have gotten harder (although I agree that they have). A generation or two back, it wasn’t expected for the average family to have two cars (partly because the woman stayed home). Houses were generally smaller and there was no Internet, cell phones, or computers to pay for. People didn’t take exotic family vacations on a regular basis. And the priority was to live within one’s means because credit wasn’t even available. The media machine has now convinced everyone that they need a whole bunch of crap that they don’t, and didn’t have in the past. As a result they indebt themselves in order to get it. Mix that paradigm with the fact that wages really have been stagnant, and you get people getting themselves into trouble. But that doesn’t change that we’re still enjoying among the highest standards of living in the world. We, the average people, are just whining because we used to have it even better.
It’s harder to be wealthy than it was before, no question. The answer is to adjust our standard of living, and think outside of the box when it comes to income streams. I say again: we still have it pretty good. I hope I can still say that a generation from now.
Guess I’m just lucky…I got to go to war 3 times and by the looks of things will get a 4th but hey, Almost got a masters, several well paying IT certifications and a few years short of a guaranteed retirement.
I don’t know your history, but I taught HS for a year and I was shocked at the amount of teachers that had massive student loan debt to get a job that paid 26k per year. We stress the importance of college but sometimes that degree just doesn’t make economic sense.
We all gotta live with the choices we make.
Having purchased/leased/been supplied with well over 30 cars in my lifetime, the oldest being a 1959 and the newest a 2011, I would have to say categorically that the cars manufactured today are superior to those of the past, in pretty much every aspect except styling.
In regards to standards of living, all research indicates that disposable income in North America peaked sometime in the early to mid 1970’s. It has decreased almost steadily since then, one reason for the need for two income families.
Of course with the rise in two income families we have seen a startling increase in the cost of housing.
To offset this, the cost of consumer products in particular electronics has decreased dramatically. However as a result of this, the appliance repair industry has almost disappeared.
Between the 2 North American countries, in general the rich in the USA are much better off than the rich in Canada. However the poor in the USA are in general much worse off. The middle classes are relatively equal with the exception that the Canadian population has a more effective ‘social network’ to protect them in the event of a catastrophic change.
Hence Canadians in general need not worry about bankruptcy due to medical bills. And although the costs of post-secondary education have been driven upwards considerably in most provinces over the past 15 years, you can still get an undergraduate education at a ‘world class’ university for about a $6,800 annual tuition. And government sponsored loans are fairly easy to obtain.
Consumer costs are generally higher in Canada, and Canadian personal tax rates in comparison to those in the US, although still higher (in most cases) are now comparable and in fact Canadian corporate tax rates are lower than American ones (hence for example Burger Kings announcement of their proposed move to Canada).
Finally as others have posted, a basic auto (Accent, Micra, etc) now has content that you could not get on a Cadillac or Rolls Royce a few decades ago (air curtains, stability control, sat/nav, etc) and usually comes standard with features that were considered high end luxury options (power windows/locks/brakes/steering/A.C.) etc. for a comparably lower price. However the decrease in prices are as they have posted not infinitely sustainable.
Sorry for the novel.
mkirk, not in the new America. In the new America people blame someone else for their misery and stand in the welfare line to get money for nuttin’, foodstamps and cellphones for free.
“Oddly, the government, which is so anxious to regulate things like the price of cable TV or high-speed Internet, has taken a hands-off policy towards higher education.”
Anything but! The government’s hands-on policy in making massive amounts of guaranteed loan money available along with their favorable tax treatment towards paying for school is exactly why education prices have skyrocketed.
“Oddly, the government, which is so anxious to regulate things like the price of cable TV or high-speed Internet, has taken a hands-off policy towards higher education.”
Sorry but your are wrong – the government is big time hands-on when it comes to higher education. State Unversities, student loans, student and research grants, various mandates for equal opportunities/affirmative action that all require more administrative overhead (i.e. jobs for Gender Studies and African studies majors), are just a few of the ways that government is in the higher ed market. Most of these things have increased costs and arguably decreased quality.
What’s a bit horrific is the price of housing. Cars (computers, certain other goods) have tracked less than inflation, but the price of housing in places that aren’t suffering Detroit Syndrome is problematic.
We’ve really hollowed out the middle class to help the “job creators” /s
What will be particularly ugly is watching a couple of disenfranchised generations struggling not just with debt loads, but with less job prospects all while corporate a government (tax) revenues drop as the Boomer pig works it way out of the python.
Ten or so years from now people are going to be kicking themselves for financing the rich and the old on the backs of the poor and the young. Populism can be ugly…
Housing costs are local. Canadians seem to get exceptionally screwed in the big cities, but I bet houses are still reasonable in the Maritimes or the great stretches in-between. Just harder to find a good job… I’m a big fan of the various Canada-based house-fixing shows on HGTV (the House Porn Channel), the prices are truly astounding in Toronto and Vancouver.
Similarly, here in the States some areas are insane. But most are not. NY/NJ – crazy. LA/San Francisco/Chicago/Boston. Insane. Maine? In my most urbanish neck of the woods, I can buy a perfectly nice 2-3br 1-2 bath house for $175-250K. Good schools, great place to live. No traffic to speak of. Decent employment opportunities, but salaries are not amazing and the weather sucks for 1/3 of the year. In Atlanta or Dallas you could buy what I consider a palace for that amount of money, but your commute will probably suck. In really rural Maine you can still buy a buy a nice house for $40K. Probably best if you have a job where you can telecommute though.
Urban living is GREAT, but it is disproportionately expensive.
Canada metro areas are crazy alright. Someone I know has a 1200-sq ft home on the very eastern edges of Vancouver under the SkyTrain, next to a 6-lane boulevard, next to a fire station that sold for $900,000 2 years ago.
That’s why people commute into the city from the burbs bordering the US border now.
“Housing costs are local.”
Any place there are good jobs, housing prices are out of control by historical standards.
Any place housing costs are reasonable, there are no jobs.
I don’t think this is true, but I have primarily looked in the Southern US.
Not only is it not true, its complete BS. The places in the US with ultra-insane housing prices are limited to a few of the biggest, most popular cities: NYC, LA, SF, DC… you can probably argue it out about Boston, Chicago, Dallas, Portland, Seattle, and a few other major metropolitan areas that are currently hipster popular, but even those places have affordable housing, it is just not downtown. And then you have the entire rest of the country where the “civilized people” simply can’t imagine living. There are jobs and at least fairly affordable housing, you just have to get out of your bubble and look around. Sure you might not be able to afford to live 10 minutes from your job… not many of us can. Even here in Florida, we have some of the cheapest nice houses in the country, the difference between commuting 10 mins and 30 mins is $100k or more.
Actually, the places with the highest housing prices tend to be those with the most government restrictions on building additional housing stock. Such policies are usually most heavily supported by environmentalists who have lived in the area for 30 years and bought their houses when prices were cheap, and benefit greatly from the restricted supply that have given them a great return on their investment.
Why is it a shock that cars are better AND cheaper than they used to be? Are these items better and cheaper than they were 25 years ago?
1. TV
2. Cell phone
3 Personal computer
4. Microwave oven
5. Refrigerator
6. Washing machine
Because there aren’t hoardes of people trolling the Internet complaining about how no one can afford a microwave these days due to the prices climbing too high.
Probably yes to the first three, but the last three are definitely NOT better than they used to be. Cheaper maybe, but not better. Appliances now are made to last 2-5 years (microwaves maybe 1 year)and when they break they are often too expensive and/or complicated to repair. And none of these appliances does anything significantly different (whereas I can see the argument that cars of today perform better and are safer).
If you are burning out microwaves in a year, you need to lay off the popcorn! More like 4-5 years. I am perfectly happy to buy a new one every 5 years for $79 and get the latest and greatest, vs. $500 and it lasts for 10-15. It’s still cheaper, not even adjusted for the time value of money. I bought the absolute cheapest washer and dryer I could find new when I bought my house, and they still made it through 10+ years of up to 4 people’s use. Not bad for $375 for the pair. Sure my Grandmother still uses the Maytag she bought around when I was born, but it cost a fortune, uses a ton of water and electricity, and doesn’t do as good a job washing clothes.
Seriously, the good old days were not all that good. In fact, they kind of sucked. Though I do agree that it was probably at least a little bit easier to work your way up in the world. My Grandfather dropped out of high school to go fight in WWII, but he worked his way up to being a Senior VP at a local company, and retired a fairly wealthy man. That sort of thing is a lot harder today, at least working for someone else. Though then again, how many folks managed it even 60 years ago? Damned few. At least today you can dropout and make a fortune inventing some website or some such.
My 1973 Sharp microwave has been in daily use since 1974. The magnetron failed under warranty in under a year, but the replacement part has been solid. Of course, my niece managed to nuke an egg to oblivion in it after a couple of decades. That cracked the plastic inner liner and made it hit the fan, literally. The blades were bent out of shape badly. But I hand bent them back, epoxied the liner. Made some damn good gravy with Campbells beef stock this evening. And she’s all stainless, and weighs 87 ibs.
They don’t make ’em like that anymore! Hunky. Of course, it doesn’t have variable power – I had to learn to use it to get best results. Second nature after 40 years.
Just an anecdote.
I wasn’t much of a fan of the ’89 Accord SEi. $26,400 in Canada. Days of the low dollar. My best friend’s brother tried to sell me one. I remember the test drive clearly. It wasn’t a patch on my ’88 quattro, and like all pre ’95 Hondas was destined to live a short and nasty life under attack from the tin worm. They were dreadful.
Now, a 2014 Accord Sport costs $25K in Canada plus the ripoff $1700 delivery. It is an amazing deal if you can put up with the usual Honda eccentricities like a total of 5 inches of wheel travel and hobbyhorse ride, together with a turning circle of 40 feet. But with galvanized tin, it now lasts long enough for the owner to pine for something a bit more interesting as the years roll by.
Too expensive to repair, but only in relation to how cheap it is to replace. I learned this the first and last time I took a VCR to get fixed.
dont interrupt the perpetually peeved with your logic.
Everything sucks, because they dont have a BMW.
Not just cheaper and better, but some items on your list didn’t exist, or certainly didn’t exist in their present form.
Who would want to use a 25 year old computer now? Cellular phones were barely a blip on the radar in 1989. My new oven might not last 25 years like it’s predecessor, but it cost less in actual dollars and has dozens of extra features that weren’t available when it was purchased.
Maybe the average North American’s purchasing power has declined, but the value proposition of a lot of consumer goods is far higher than it was 25 years ago, and automobiles are a prime example of that. A Nissan Micra starts at under $10K, and will be more reliable, longer lasting, more feature laden and far more fuel efficient than a car that sold for $30K 25 years ago.
Growing up, I heard the same complaints from my grandparents’ and parents’ generations – everything was better in the “good old days”, and I’m reading the same in the comments here. The good old days weren’t better, they were different. 25 years ago, cars came with drum brakes, no airbags and killed you in a high speed collision. No thanks. I do not want to return to the days of rotary dial phones, no internet, no smart phones etcetera. You’ll have to pry my Samsung Note 3 out of my cold dead hands before I give it up.
The world has changed in those 25 years, good and bad, but it’s changed, just like it has for every other generation preceding us. Either change with it, or be left behind. Personally, I can’t wait to see what the next 25 years are like, if I live that long.
Edited to add: And for those complaining about the kids today and their expectations and entitlement, who created the situation? Not them; blame their parents and the marketers and advertisers that are of their parents’ and grandparents’ generations. We are to blame for what our children have become, not them.
In Australia vehicles have reduced in price since 1990 based on weekly earnings.
In 1990 a Nissan Pulsar was $19 990 and now in 2014 they are $19 990. Now they come with ABS and many other acronyms and power windows, good sound and on and on.
Our wages have increased 2.5 times over that period. So vehicle are less than half the price they were in 1990.
I bought a mid spec Nissan D20 diesel dual cab ute in 1997 and it cost $44 000, in 2012 I bought a BT50 fully blinged including leather and I got it for $46 000.
I think vehicle prices comes down to what country you are in and how the country has performed economically and how much of the economic growth actually made it into the hands of the middle class.
Cars today are tremendously high-value if you don’t get suckered by options packages like my idiot nephew and his almost-38K row of urinals.
It’s pickups that are too inflated in every sense.
You are spot on. We need to look at the cost of a full size pick up truck now vs lets say 2003.
My own personal example: Dodge 2500 quad cab diesel SLT 5 sp manual (non H.O. Was NOT California legal) PW, PL, AC, cloth, cruise and CD player. $29,800 after rebates etc.
That truck today? Can’t get the MT but most likely 50k and I don’t think they have 10k in the hood. 11 years? And the price nearly doubles? I love the truck for 30k, I hate it at 60!
Incidentally, I would gladly take the 03’s reliability/maintenance cost over anything offered today. Oil change and fuel filter every 10k and you are golden. Compounded with the fact the new one, from what I have read, gets less real world MPG vs the old one.
In the end, yes, cars are a better value hands down. Trucks not at all.
Ramtrucks.com Build Your Own says I could get a Ram 2500 crew cab (no Quad Cab on HD’s) 6.5′ bed (you didn’t specify bed size) 6-speed manual (yes, that’s still available) 4×2 SLT for 44,515. 4×4 is $3,170 more. 8′ bed is an extra $200. Where are you getting your information?
4×4 short bed 47.5
Paid 29.8 11 years ago. Seems like. Large jump for a decade, no?
Also a jump in capabilities. Ramtrucks.com says the 2500 4×4 Cummins 6-spd SLT crew cab/6.5′ bed has a tow rating of 16K lbs and a payload rating of 2,224, less passengers, of course.
“Dodgeram.info” says the 2003 model had a tow rating between 10,950 and 12,950 lbs., depending on axle, and a payload between 1990 and 2120.
It doesn’t matter if you’d never use the capabilities or not–they’re included in the price.
$29.8 in 2003 is $38.5 today. $47.5 is a 23.4% increase over that. 16,000 lbs. is a 23.5% increase over 12,950. If anything, you’re getting more truck for your money. (I know, a tenth of a percent, wow.)
Not to mention the overall better quality of the new trucks. I remember our ’96 as many things, but words like “quiet” and “non-plasticky interior” don’t come to mind.
If any of my calculations or sources seem faulty, let me know.
Not to mention that a 2003 Dodge was built in the darkest days of the Daimler Chrysler “merger of equals.” Daimler was doing everything it could to loot Chrysler and it’s products.
The new Ram pickup trucks are a far better vehicle than the 2003 version. Interior materials and design are better, build quality is better, powertrains are bigger and better, the list goes on.
You would have to be a Luddite to choose the 2003 Dodge pickup over the 2015 version.
Try work trucks. I bought a regular cab, short bed, V6 auto Silverado in 2006. I still have the old, “blue” GM credit card, so they shoot $2k or $3k my way every once in a while to buy myself something nice…. with all rebates, I paid $14,000 OTD — there was a lot of 6 % use tax to pay on the rebates etc; I think the price of the truck was all the way down to $12,600 through the various rebates.
I don’t think I could drive that truck off the lot for less than $20, no matter what. Sticker is all the way over $25k, and rebates are thinner than they were back then…. and that’s on a product that isn’t’ selling all that well.
I agree about the cars, though. My Cruze as a ridiculous bargain to lease… All-in, $4k to drive 30,000 miles and 24 months.
In non-rural areas, the buying public “must” have a CUV upon birthing their first child. Nevermind that if you look hard, there are much cheaper hatchbacks and MPVs that offer the same space.
If you want to troll your friends on bargain pricing, tell them you bought a Scion xB that cost $10k less than their RAV4s and can haul nearly as much stuff.
The demographic that buys vehicles based on their children’s perceived needs isn’t known for their rational purchasing decisions. See housing for another example.
And let’s not get started on health costs………..
No, let’s not. This is TTAC, not TTAHC.
Cars are noticeably cheaper. For example, consider the 1984 Tercel 4wd wagon that was featured on “Junkyard finds” a few days ago. In today’s money that would be about $25,000– a Mazda CX5. Yet I would say that the Tercel’s market niche corresponds very well with the niche of today’ s Subaru Forester, about 10% cheaper than the Tercel in today’s money.
On top of that there is what the economists call “hedonic” value, the same thing being made better with the passage of time. A Pentastar engine is a similarly sized workaday engine to the 225 slant six, but its leagues better, for example. I’m not even discussing that, but we all know it is there.
What is the cause of the better prices? I’d say a lot of it is simply increased competition. We have three large domestic manufacturers in the U.S. alone, where market forces suggest we would have two, or maybe one. How much would I have paid for my F-150 in 2012 without GM? A thousand dollars, easily. Maybe two.
Head over to census(dot)gov and open the People by Median Income and Sex
All Races spreadsheet (real 2013 dollars):
Males ’89: $36,084; ’13: $35,228; -2.4%
Females: ’89: $17,457; ’13: $22,063; +26.4%
That Accord costs about two percent less now than in 1989, so for men everything’s about even, although the new Accord is a vastly better car than the ’89. For women, well, there’s a reason much of the automobile advertising is aimed at women nowadays; they’re much, much better off than they were back in ’89.
Interesting.
Ugh, fact.
Inconsistent with the whining of the masses. Therefore, ignored.
My first new car out of college was a 1990 civic si. Paid $11500 financed for 48 months at 12.5%.
I drive two cars from 1989 right now. Am I a classic car owner yet?
I might not be the best option when discussing 1989 cars since my age back then was negative 2 but I can definitely see that even though the quality of cars has improved significantly compared to early 90s levels, the expectations of customers have basically gone through the roof, even though purchasing power in many places – such as USA – did anything but.
In the past, there was a definite disparity in quality between a mainstream and a premium car, and – to a lesser extent – a smaller vs a bigger one. Now, the gap has narrowed significantly, and a relatively cheap car can not only do more than a luxury ride from 20 years ago could, but is often giving a comparable, premium competitor a run for its money. The problem, however, is with the customers. Nowadays, the pampered, self-described sophisticates like to take swings at competent cars for the most insignificant details whose impact in everyday usage is marginal at best. No soft-touch plastics on upper dash? Oh-my-gawd… That is, like, unacceptable! An exposed fastening here or there? The deal’s off. Cloth instead of leather? You deserve better!
I can understand that the current marketplace is crowded, and fierce competition fosters high expectations among customers but when objective metrics show no significant difference between competing products then it’s time for marketing departments to prove their worth by making such petty shortcomings appear to be serious faults worthy of spending serious cash to avoid. They also brainwash the customers into thinking that there are choices that are beneath them, and there is THEIR offering that will send the right message about the customers’ success, their values, their very self.
So yes, cars today are much better than they were in 1989 (even though I, like DeadWeight, believe that peak quality is already behind us) but that is not enough for our hedonistic societies. We believe we deserve better, and the marketing machine, and the banking machine, and the government all want us to keep thinking that way.
One of many things that, in my opinion, don’t help is the ubiquity of loans and financing plans available.
There are may things I disapprove of in my second-world economy, but I’m glad that we haven’t jumped head-first into this loan-dominated economy (yet). I just can’t understand how so many Americans (and Westerners in general) view perpetual debt as something normal ,safe and predictable but when you have your sights set on spending money, I guess it’s just the easy way to go. It’s tempting to have the nice things in life without working for them first but rather holding on to the increasingly fickle expectation that the gravy train will keep on rolling. And every market hates nothing more than those few who still practise delayed gratification.
Same goes for installment plans – just like in that – apparently false – popular belief about boiling a frog, it’s easy to justify spending more money when small installments are just automatically deducted from your account every month, and much harder when you see a large chunk of cash taken from you in one go. If the latter was the prevalent method of buying cars, I would guess you would see much fewer examples of living above one’s means.
With fiscal responsibility pretty much out of the window, an increasing percentage of people are, just like JuniperBug said earlier on, chasing prestige. An average new car consumer is no longer content with having a machine that trumps everything that has been built before in terms of reliability (until the warranty runs out, of course), comfort, features safety and refinement. He believes he deserves more. And when the time comes when his income can no longer sustain his lifestyle, he cries, to quote JunB once again, that the deck has been stacked against him.
And, when you come to think of it, for the majority of customers, a car is rarely more than an appliance. Whether a Stratus, an A8 or a Ridgeline, as soon as it’s bought it’s judged on its ability to go from A to B reliably while incurring acceptable running costs. Just like – in a long term – a TV is judged by whether you can watch your programs on it – no matter how many technologies they packed into it – and a microwave is good for as long as it heats the meal – regardless of how many buttons for various functions it has. That’s why I believe that car customers of today are largely misguided in the way their expectations are excessively raised. The consumers like to think of themselves as the aforementioned sophisticates – they want their purchases to satisfy every conceivable need they might ever have; only the question of whether that is really worth the premium is ever more rarely asked.
This, right here, is a millennial who isn’t likely to be whining about his lack of success in life in 10 years.
Kudos, sir. I expect great things.
Agreed. Now if he’d just make friends with Mr. Paragraph …
What about the interesting problem this has posed to the Japanese manufacturer?
In 1980 I bought a 4 door Accord: auto, dealer installed air, no radio, wind up windows, price $7800. In 2012 my daughter bought a Honda CRV EX (built in Japan) with all the usual standard items that the readers here know well. Price $24,000. For Japan, in 1980, the dollar brought in 226 yen. In 2012 the dollar brought in 90 yen. Thirty two years later, the vehicle we got was about 3 times more expensive, but yielded, per dollar, about one third the number of yen. Additionally, it had vastly more material (steel, glass, electronics) involved in its manufacture.
Its not only amazing that we can buy these cars, its amazing that they can build them at a profit.
Gasser,
The Yen/$ relationship is not terribly relevant in your example, as both vehicles were built in America. Yes, some parts and engineering were Japanese in origin, but the bulk of costs were in the US.
Honda now produces more vehicles in North America than it sells, i.e., it is a net exporter of vehicles. What other mainstream carmaker can say that?
Both cars were built in Japan. Both had serial numbers beginning with J.
In 1980 all were built in Japan. In 2012 some CRVs were imported to California from Japan to meet demand. I purposely looked for one of those.
Interesting you bring up the dollar/yen relationship. The last two years have been nothing short of the total destruction of the Japanese Yen through devaluation in an attempt to jump start Japan’s export economy and get consumers spending again. It, of course, has backfired and thrown Japan into tailspin recession combined with heavy domestic inflation.
When I graduated from college in 1989, all I wanted was a new car. The car I drove through college, a 1980 Chevette, was on it’s last leg. It was the stripper version, 4-speed, no a/c, vinyl interior. Good mileage and dependable. I was torn between an 89 CRX SI and a 89 Ford Mustang 5.0 LX with the 5 speed manual. I went with the Mustang. I remember my payment being $275/month, thinking I wasn’t sure I wanted to pay that much. Funny how that compares to today. Anyway, the Mustang was loads of fun and dependable, even though I drove it like I was mad at it all the time. Lot harder on back tires than gas.
Later in life I would buy several Toyota and Honda products during the mid 90’s,all of them excellent cars. My 2006 Toyota Sienna I bought new has also been a great vehicle. I do think the Japanese cars during the 90’s were “over engineered”. Seems like you couldn’t kill those Honda Accords and Toyota Camrys from 1992-1998. But that could also be the passage of time distorting the view. Maybe I will think the same thing of today’s cars in twenty years.
One other thing that I think has changed the way people look at money. When I first started working, I got a check I cashed and had all that money in my hand. Now, with electronic transfers in all facets of monetary transaction, the reality the worth of money seems somehow diminished. I wonder if buying habits would change if you had to break a $5 or $10 at the convenience store versus swiping a debit or credit card.
One thing that should be noted is that a 1989 Accord was about the length and wheelbase as today’s Civic.
Inflation adjusted, a base 2014 Civic sedan has an MSRP of about $9600 in 1989 dollars. Today, you’re getting about the same size car with more features and more power for less money.
This is an important point, the Accord buyer today gets a free upgrade to a full size with all the improvements of a modern car. In between all this wailing about real wages and the middle class, it’s obvious the average consumer has never had it so good.
I’m not sure I would go that far, Danio. I would just say car prices and middle class economic security are two separate issues.
It’s not unusual for a young person these days to turn down a free hand-me down car. Usually this provokes outrage from the would-be donor. Such would have been unimaginable in the olden days. It’s not necessarily that the young person is spoiled, so much as serviceable hooptie cars are available to them in great abundancee. My first car had over 100K and sold for half of MSRP list as a five year old car (albeit in a high-inflation environment) That was just normal back then.
My first new Honda was an ’89 SE-i which I dearly loved and really miss. Next up was a 93 SE which we still own, a little later I bought my dad a 00 EX V6 (and inherited a few years ago after he died) I currently drive an 04 TSX 6-spd (navi). Throw in a 99 Ody EX along the way and I guess you might say we like our Hondas. BTW, all bought new.
I think I’m somewhat older than most of you guys (my first car was a ’77 Camaro). That said I still retain every receipt and sticker from each car and can honestly say none were ever perfect, the Camaro least of all.
If you want to discuss the 89 Accord, it was glorious just like a 7/8 scale Acura Legend of the same year only $10k cheaper. I remember because I kept vacillating between the two and couldn’t justify the Legend. But after owning the car for more than 13 years you really get to see all the good stuff and the bad. If there was one other “mistake” it was not getting the 5-spd manual.
For example, even though the SE-i that year was the 1st Accord to offer 4-wheel discs (no ABS back then) they really were undersized and warped… a lot. The tires were 60 series Michelin MXVs but the wheels were only 14″. The SE-i had fuel injection which boosted it to about 120Hp but even though it was light, it was still slow. My mileage logs never showed it getting better than about 19-20mpg in mixed driving (mostly city). Probably because you had to nail it all the time to get up to speed.
Overall, it was a fine car and while I did enjoy far better reliability, comfort and luxury than I did from our less classy American iron (’85 6000 STE), it was not perfect. Looking back the only recall it ever had was for possibly defective seat belt buckles which affected a number of makes since they were a big supplier but that’s it… one recall in 13 years!
But at the time it was superior to most competing models and handled far better than I ever expected. It was built to a level of quality that surprised me for a car that had a list price of $18,890 and purchased for $16,500. Remember this was a car with leather, Bose, bronze tinted glass, fuel injection, power everything and even an innovative HVAC system that allowed you to run cool air through the upper vents while running heat at the floor. The hidden headlights really upped the game for the design and never once failed to work.
It’s easy to look back and find fault with older cars looking through the prism of time. Just like what will happen to current models 25 years from now…
Don’t know if these pics will show up but here they are:
http://s626.photobucket.com/user/hiptek/slideshow/89SEi
Riddle me this: Why does a 2015 Chevy Tahoe LS with CLOTH seats cost $46k?
That car would be like $30k ten years ago. Has inflation REALLY gotten that high?
Not necessarily, just that GM is getting really bad at pricing. Or rather, they know how much their customers will pay for their SUVs and are determined to push the envelope with each new model, just to test the customers’ patience.
Think about it. If you were able to sell a vehicle worth $35K for 45, would you?
Drzhivago138, +100!
That’s why we bought a Sequoia. Much more content for the money, ergo a much better value.
I want to like the Sequoia, I really do. It’s a sign that the Nipponese have truly embraced ‘Muricanism by building a shameless pigfat SUV.
But I think they went too far. They went full pigfat. Never go full pigfat.
Drzhivago138, I never look a gift-horse in the mouth. But after much deliberation, my wife and I decided on a Sequoia. She picked it up yesterday.
Best part of all, due to recent business developments (her mom and dad are retiring and my wife is taking over day-to-day operations management of the family’s real estate business 1 Oct), I didn’t have to pay for it.
The business bought it for her, as a business expense with accelerated depreciation.
Unintended consequences of all this, we still have the 2012 Grand Cherokee plus the 2008 Highlander, but we gave the Highlander to our 17-yo grand daughter in El Paso, TX, today.
I agree on the pigfat. It’s just way over the top. It’s more of everything no one needs. But it is sooooooo much better than her dad’s 2013 Suburban in ride, handling, ergonomics.
I drove it today, and it is everything my Tundra is not. Where my Tundra rides and handles like a man’s truck, the Sequoia is just a luxo-barge.
I wiped my feet before I got in.
Bottom line? I like it. It is even more refined than the 2012 Grand Cherokee, and heaps more powerful!
“Has inflation REALLY gotten that high?”
Maybe it’s just that the dollar isn’t worth nearly as much as it was ten years ago.
Maybe the percentage of individuals in the ‘middle class’ (in America) has diminished.
There will always be people with money. And I’ve had one individual tell me on this site recently that he’s doing much better today than six years ago.
So high prices are relative. It’s like mind over matter. If you’ve got the money you don’t mind, so it doesn’t matter.
And then if you take really good care of your ’15 Tahoe LS, it’ll be worth $2,500 in ten years.
If you want to know where all the money goes instead of into new cars, just look in 3 places: Student loan debt, Credit card debt, and 401(k) plans.
Our company automatically enrolls new employees in a 401(k) plan (with a generous match), the employee has an “opt-out” capability. But the drumbeat drones on from the Plan Administrator: “If you don’t have a 401(k) plan, you’re turning down free money… Social Security won’t be there for you… (you’re an idiot for not doing this…)”
Look at the stock market – so “healthy”, while the financial “health” of many citizens has yet to recover.
I’m amazed that car sales are as good as they are.
“I’m amazed that car sales are as good as they are.”
Me, too. All these TTAC Caddy articles made me peruse Good Car Bad Car’s YTD and monthly sales tables; I was transfixed. As a first-gen arriviste to the educated middle class, I know the kids of my peer group aren’t accounting for much of those sales. Friend after friend and numerous acquaintances are dealing with under/unemployed degree-holding boomerang kids.
Truly, it sucks to be a young American of modest provenance. That’s why I didn’t make any.
>> But the drumbeat drones on from the Plan Administrator
Drums don’t drone, but aside from that, are you disagreeing with what they’re saying?
Out of all the bad ways to pay for retirement, the 401(k) is the best, because the money has to be paid as the work is done, not promised for later years.
Anybody in a public pension plan should do some reading about the shenanigans that go on in their accounting.
Cheerfully yours -m
And, if you’re bearish about the market, most plans give you access to funds covering all sorts of other instruments. I know multiple people with their 401(k)s essentially invested in gold.
Given a choice between a brand new 89 Accord or a 2015 Accord, I’d pick the 1989. I just like it more–it looked better and was more entertaining.
Objectively, the only area it is better is visibility.
Yet even I am the first to conceded that USUALLY today cars cost the same or less, and we get more features, safey, and performance, and usually more mpg.
Some reasons they cost less–in 1989, car designs took more time and labor to assemble.
The cars sold in the US were built in the US, Japan, or Europe, all relatively high wage countries.
Today, even when assembled in high-wage countries, many of the components are from Mexico or China (low-wage). Non-union US assembly plants in the south pay lower wages. So that has absorbed much of the cost increase we should have expected from more content, such as 10 airbags per car, stabiitrak, anti-lock brakes, power everything, etc.
Short of moving more actual assembly from US, Japan, Euro, to Mexioc and China or India, this trend has largely played out.
The ability to lower costs here is not ‘infinite’ as in computers. As automakers start trying to improve MPG to meet the US govt’s onerous MPG and safety and emission requirements, the price of vehicles will start to go up.
I bought new a 1985.5 Mustang SVO for $12,000. It was a lot of money then. I compare it to my 2007 Audi A3 that I bought used in 2008 for $22,000. The Audi, had more features, more reliable and put together better. To me that suggests cars are indeed less expensive today. Then looking at a new A3, it’s at $35,000-$40,000 and I suspect a 2015 Eco-Boost Mustang to not too far behind. That seems expensive.
Mass market products don’t get magically less expensive in real dollars. Engineers put many long hours into figuring out how to deliver more out of less. Digital electronics get cheaper because engineers keep figuring out how to fit more transistors onto a wafer of silicon. Engine power output vs. displacement goes up because mechanical engineers figure out how to get more peak power out of a given mass of engine metal without having them self-destruct. Other mechanical engineers put lots of work into reducing parasitic losses on many fronts to improve fuel economy. Yet another set of mechanical engineers put in long hours figuring out how to improve crash safety within the cost constraints of a mass market product. What consumers experience as automotive “progress” is the cumulative effect of lots of man-hours of work.
I own a 2014 Honda Accord at the relatively high EX-L trim level. It’s a really nice mass-market car, but a luxury car buyer from the past wouldn’t mistake it for a luxury car. A luxury car uses higher quality materials with more labor intensive attention to detail while a mass-market car uses more parts stamped out of molds without a lot of secondary machining/finishing. Cast aluminum vs. machined aluminum. Molded plastic vs. carved wood. Vinyl and low-grade leather vs. high-grade leather.
One reason many people wrongly perceive that things have gotten more expensive over time is that they fail to compare similar levels of quality. I suspect that a larger portion of 1989 Hondas were sold with a relatively low-line trim level and that today a larger portion are sold with high-line trim, so people end up comparing a bare-bones base car price of yesteryear with a top-of-line loaded price today and being shocked. Same with electronics – how many people bought a 60 inch TV in 1989? Nobody – the biggest then was about 32 inches, but people don’t compare a 32 inch today to the 32 inch then, they compare the 60 inch with stereo sound, internet connections, etc. The fact is bare-bones products and brands don’t sell very well because people seem to have the money and/or debt capacity to buy the deluxe versions today – just look at how much sales of high-end brands in virtually every category have increased over the last 25 years, and how most low-end brands are desperately attempting to go up-market to join the party.