EAST LANSING – Anderson Economic Group has released the results of their recent analysis comparing new and used vehicle price increases to wage growth in the US private sector.
AEG’s experts analyzed US Bureau of Labor Statistics data related to the Consumer Price Index (CPI) to compare the cost of new and used vehicles relative to average weekly earnings for private jobs.
Among the findings: A notable increase in 2021’s new car prices. The CPI for new vehicles jumped 11.8 percent in December 2021 over December 2020. The price of used vehicles increased even more profoundly, with a CPI growth of 37.3 percent for the same period.
AEG’s Cristina Benton will appear live on MITech TV Monday at 2 pm to explain more.
The increases are due, in part, to tight inventory amidst production issues and strong consumer demand. AEG consultant Sara Bowers points out that “It’s been decades since used car prices increased this dramatically. The changes we’ve seen recently are remarkable.”
At the same time, average weekly earnings for all private jobs in the US increased only 4.9 percent, from $1,034.75 in December 2020 to $1,085.42 in December 2021. AEG’s Dr. Cristina Benton notes that “The increase in the price of new vehicles has been extraordinary, easily outpacing the modest increase in employee earnings last year.” Illustrating the real-world impact of this increase, Dr. Benton explains that “Employees need to work three weeks more than they did in December 2020 to afford a typical new vehicle in December 2021.”
This worsening ability to purchase a new vehicle was exceeded only by consumer’s ability to purchase a used vehicle in 2021. For the typical used car, the number of additional weeks of average weekly earnings required increased by five over the year prior:
December 2020 | December 2021 | |
| Average new vehicle price | $41,335 | $47,077 |
| Average weekly earnings | $1,034.75 | $1,085.42 |
| Weeks of average earnings to buy a typical car | ~40 weeks | ~43 weeks |
November 2020 | November 2021 | |
| Average used vehicle price | $21,708 | $27,569 |
| Average weekly earnings | $1,044.23 | $1,077.09 |
| Weeks of average earnings to buy a typical car | ~21 weeks | ~26 weeks |
| Source: U.S. Bureau of Labor Statistics; Kelley Blue Book, Average Transaction Prices (New vehicles prices); Cox Automotive (Used Vehicle Prices). Analysis: Anderson Economic Group | ||
“The methodology for comparing the price to purchase a new car with average weekly earnings was pioneered by Dave Littman at Manufacturer’s National Bank (now Comerica) in the 1980s,” said AEG’s principal and CEO Patrick Anderson. “It remains a credible indicator.”
Anderson Economic Group’s consultants, renowned for serving all three tiers of the auto industry, track these key automotive industry and general economic performance metrics over time. The Automotive Dashboard (andersoneconomicgroup.com/automotive-dashboard) is a publicly available resource with rolling data overview that tracks metrics critical to the auto industry.
