Why Are Cars So Much More Expensive Than They Used To Be?

January 23, 2010
I'm always amazed when I hear people reminisce about a time when $4000 would get you a really nice car.

I haven't been around nearly long enough to remember something like that, so today's car prices aren't quite as shocking to me. Obviously, the cost of everything has gone up--but what besides a growing economy, inflation, etc..., really has caused the huge increase in average vehicle prices over the last few generations? How can a 2010 Ford F-150 cost so much more in 2010 than it did in 1950, and still be a top seller in the U.S.?

In a nutshell, the cars of today are more safe and durable, and perform better than the cars our grandparents remember. There are a few reasons behind the change.

Design: Huge investments are being made for the development of modern vehicles. Thousands of hours of research, design, testing, and negotiating are required for individual parts from start to finish. There are immense budgets required for salaries of research and development employees, test lab equipment, prototype materials, and software. Engineers and scientists know a lot more today than they did 50 years ago, and that knowledge allows them to design better parts. The foundation for this stage of the process is quite extensive though, requiring more funding than ever before.

Quality: As the major car builders gain experience and customers, their understanding of quality and reliability in the real world improves - and customers expect it to. Proving that every part on a vehicle can endure a lifetime of use requires extensive testing. This equates to accumulated man-hours, disposable materials, and properly maintained equipment. It takes a huge amount of cash collectively to prove durability of a new vehicle before it can be safely marketed and sold.

Safety: Along with improved quality and reliability, customers (and the government) demand more and better safety features. Air bags, active braking and stability control systems, and crash avoidance and protection technology have all taken years to develop and refine. These safety features require lots of additional equipment, testing, and research, which cost manufacturers more money.

Government regulations: Government in North America and around the world has become more and more involved with the automotive industry. We are beginning to see more political influence on safety and emissions requirements every year.  These can be good for consumers and the environment in the long run, but require new types of investments on the part of the companies selling the cars--first and foremost among them, investing in lobbyists.

All of these accumulated costs are reflected in the component and finished vehicle prices. We, the customers, must bear the burden of some of this cost in order to reap the benefits offered by the improved cars of the 21st century. Yes a 2010 F-150 costs a lot more than a 1950 F-150 did, but a 2010 does more, lasts longer, keeps you safer, and meets much stricter regulations.

So while you pay a lot more now, you get a lot more too.

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