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Uncle Sam's "Optional Extras"
Where all that inflation in car prices has come from.
by Eric Peters (2004-02-23)

In 1980, the base price of a brand-new Toyota Corolla was $5458. Today, a new Corolla starts at $13,570 - more than double the 1980 cost.

Why the massive uptick?

Inflation is a factor, but only part of the reason. Even adjusted for inflation, the price of cars has gone up markedly. For example, the MSRP "sticker price" of a brand-new 1984 Chevy Impala sedan (a popular family-type car) was about $8600. That works out to about $16,000 in today's dollars. But the MSRP of the '04 Impala is $21,485 - a difference of $5485.

So who is making you fork over the extra five grand?

The answer is, the government - in the form of regulatory costs that are passed on to consumers and mandated "options" such as airbags, 5-mph bumpers and CFC-free air conditioners that have added thousand of dollars to the price of today's new cars and trucks - both in terms of initial cost to buy, as well as over-the-road costs to maintain, repair and even insure.

Citizen uprising

Prior to about the mid-1960s, cars were built to satisfy consumers, not the government. As a result, they were comparatively simple and inexpensive. A typical economy-type car of that era, something like a VW Beetle, cost about $2000 (or about $6000 in today's dollars).

But beginning in the mid-1960s, the automobile industry began having to cater to federal regulators and self-styled "Public Citizens" such as Ralph Nader (and later, his protégé and eventual Carter-era NHTSA head Joan Claybrook), in addition to the people who actually bought new cars and trucks. The Clean Air Act of 1970 imposed draconian new emissions control requirements on all new motor vehicles. Catalytic converters, fuel injection, and computerized engine management systems required billions to develop - all of it ultimately passed on to consumers in the form of higher prices.

The Clean Air Act was followed in the mid-1970s by Corporate Average Fuel

Economy requirements that pushed the automakers to build smaller, lighter, more fuel-efficient cars that also happened to be less crashworthy. This time people paid with their lives, not just their bank books. CAFE requirements also gave the Japanese automakers a tremendous (and wholly artificial) leg-up on the domestic automakers, since they specialized in small cars, while Detroit's Big Three were in effect compelled to switch gears almost overnight.

A few years later, to compensate for the decreased crashworthiness of the new generation of "downsized" vehicles, the federal government passed yet another new mandate - this time that all new cars be fitted with automatic seat belts, followed by airbags.

And as with CAFE - which studies have found to be responsible for about 2000 deaths annually as a result of people being killed in smaller, less safe vehicles - the airbag mandate cost more than just money. Since the requirement went into effect in the early 1990s, more people have been killed or severely injured as a result of an airbag deployment than were killed or harmed by all the exploding Pintos, skid-prone Chevy Corvairs and leaking side-saddle GM fuel tanks combined.

Who gets the bill?

But the government doesn't pick up the tab. You do. Automatic seat belts added anywhere from $400 to $600 to the price of a new car; airbags $600 to $1000, not including the often prohibitive repair/replacement cost in the event one goes off in a low-speed accident. Otherwise repairable cars are often "totaled" by the insurance company because of the high cost of replacing deployed airbags, which can mean putting in a new dashboard and steering wheel at a cost of $2000 or more. The increased costs are simply transferred to the consumer in the form of higher premiums.

And no has yet been able to quantify the down-the-road costs of maintaining the function and safety of older cars equipped with airbags. After ten or fifteen years, electrical connections corrode, sensors and other parts fail. Such vehicles may prove potentially dangerous as well as uneconomic to repair, even if they are otherwise running well. Not many people will put $1200 of work into a $2500 used car.

There's more. After 1986, all new cars were required by law to be fitted with a Center High Mounted Stop Light (CHMSL), the now-familiar third brake light. The CHMSL often uses multiple and expensive high-intensity light bulbs rather than a single conventional bulb. Some CHMSLs have as many as five or more of these little bulbs that can cost $20 a piece to replace when they burn out.

In the mid-1990s, the feds decided to ban the air conditioning refrigerant Freon in favor of a CFC-free replacement, R-134a. The changeover itself was not as expensive as the costs facing owners of cars with air conditioners using the old refrigerant. They had to pay hundreds of dollars (and still do) for basic service such as recharging the system that formerly cost $50 or less.

As with the total impact of taxation at all levels of government, it's hard to nail down precisely how much of a new car or truck's sticker price - and over-the-road costs - are related to the costs of complying with the ever-increasing list of government regulations.

But it's safe to say that $3000 to $5000 per car is pretty close to the mark - the amount left over after adjusting the price of new cars for inflation and factoring in the improvements and upgrades (such as better stereos and power options) that are now commonplace on most vehicles.

So we're paying, in compliance costs, about what our fathers and grandfathers paid to get the entire car.

Which of us is getting the better deal?

http://www.thecarconnection.com/index.asp?article=6880
 

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Discussion Starter #2 (Edited)
I've read similar information to this in other articles and to a large extent it is believable. However, arguments can be made to the contrary regarding many of the points mentioned that are allegedly contributing the rising costs of new vehicles.

For example, "some CHMSLs have as many as five or more of these little bulbs that can cost $20 a piece to replace when they burn out." Well, that may be true for the consumer but the manufacturers are not paying anywhere close to that amount to their suppliers. In fact, every manufacturer negotiates into their contracts with suppliers a cost reduction plan.

It may go like this, Honda contracts with Stanley (the Japanese manufacturer of lighting assemblies) for new CHMSL assemblies. The contract calls for 20,000 units the first year at a cost of $5.00 / unit. Then, the 2nd year the price drops to $4.75 / unit, the 3rd year $4.50 and eventually it bottoms out at $4.00 by the 5th year. However, as a retail customer buying the same assembly as a replacement part, it is just the opposite. You could pay $40 the first year, $43.50 the 2nd year and up and up depending on the material costs and profit structure.

The same argument is true for A/C system refriderant. "In the mid-1990s, the feds decided to ban the air conditioning refrigerant Freon in favor of a CFC-free replacement, R-134a. The changeover itself was not as expensive as the costs facing owners of cars with air conditioners using the old refrigerant. They had to pay hundreds of dollars (and still do) for basic service such as recharging the system that formerly cost $50 or less."

If the previous statement were true for owners swiching over from R-12 to R-134a several years ago, how should that affect new car prices today?

At the time the industry was switching over from R-12 to R134a refridgerants, automotive A/C suppliers took note of skyrocketing price of Freon. They decided to cash in too and jacked up their prices for the system components that weren't made any differently. Prices jumped as much as 2X-3X for compressors and condensors with no difference in material costs. True R-12 was and is more costly, but now so too are the hardware parts.

This is similar to what is currently happening to gasoline prices, when gas prices were rising a few years ago and eveyone first watched prices rise to $2.00/gal and higher, we were all shocked and angry. Unfortunately, we've all become a little more acclamated to the higher costs. Now that oil companies have us all conditioned to these elevated prices, we actually feel grateful when prices drop below the $2 level.

In another unrelated article, the price of steel is now rising to record levels on a world wide basis. Reasons sited for this are China's burgeoning economy and unparalled growth. So look for further rising car prices soon due this contributing factor.

The one thing you can say about the ethics of big business... they've certainly learned a lot from the Enron school of management. :mad:
 

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I read an interesting editorial piece on the subject that today's high-tech modern cars will not become the collectibles that cars from the 50's & 60's are. This is due to the high costs associated with computer system repairs, ABS system repairs, high-density headlight repairs, etc. etc. Imagine the out-of-pocket costs to repair/restore a 2004 model-year car long after its warranty has expired.

Just something to think about.
 

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Discussion Starter #4
hot4carz said:
I read an interesting editorial piece on the subject that today's high-tech modern cars will not become the collectibles that cars from the 50's & 60's are. This is due to the high costs associated with computer system repairs, ABS system repairs, high-density headlight repairs, etc. etc. Imagine the out-of-pocket costs to repair/restore a 2004 model-year car long after its warranty has expired.

Just something to think about.
That's a very good point. Other than a few exotics can you think of any cars produced in the last 20 years that you would want to own as a collector? :confused:
 

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Why has the gov't made all these safety features mandatory?

low seatbeat usage > mandatory passive restraints > increased costs > airbags which deploy fast to stop an unrestrained 200 lb man > airbag deaths > increased costs (both in collision repairs and re-engineering airbags)

safety doesn't sell > automakers determine safety isn't profitable > gov't needs to force safety features like side-impact standards > heavier cars > need more power > more expensive cars > opportunity for price gouging by automakers

environmentally friendly doesn't sell > see above pattern

high collision costs > high insurance rates > people whine > gov't forces 5-mph bumpers > lower collision costs > lower insurance rates > higher car costs > people whine

While not discounting automaker price gouging, our society has shown it's not willing to pay for safety and environmentally friendly features. The gov't is stepping in areas where the free market doesn't work for the greater good.

It's a tough call - a fair price for less safety, or an unfair price for imposed safety because the masses aren't willing to volunteer a reasonable price for it?
 

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Off the subject, but.... (hey, is there a smiley for "off the subj but"? Would save me a lot of typing.....) :D

What about, where does all that inflation in college costs come from?
Kids would be darn lucky if college costs had only gone up as much as car costs.

Let's see, I was in college in '69 when I got my first car......

Entry level Chevy in '69 (Nova): About $2300 (I think)
1 year private college tuition in '69: About $1800

Entry level Chevy in '04 (Cavalier): About $14,000
1 year private college tuition in '04: $25,000+

So, back then, a year's tuition at a private college was less than the car. Now, it's almost double.

If we looked at state colleges, although the cost would be less, I'm pretty sure the degree of inflation would be even greater.
 

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hip said:
That's a very good point. Other than a few exotics can you think of any cars produced in the last 20 years that you would want to own as a collector? :confused:
I used to own an '87 Pontiac Fiero and belonged to the local Fiero club for a few years. Some of these people really believed that the Fiero GT was was already some collectors car. It's Not!!!
And if it were, I still wouldn't own one again.
 
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