New cars are actually very affordable – assuming you don’t buy an expensive one. The problem is that many people don’t buy the affordable ones – the ones you can buy, brand-new, for less than $20,000 and in several cases for about $15,000 or so.
Cars like the Kia Accent sedan I recently test drove (review here) and its rivals, models like the Nissan Versa and Mitsubishi Mirage sedan, the latter available for just over $14,000 brand-new.
And that’s cheap.
Some of them over and over and over – for as long as you own the car.
First, let’s have a look at that $14k and see what the number really represents . . . in 1967 dollars. Back then, $1,785 had about the same buying power that $14k has today.
And what could you buy back in ’67 with $1,785?
Interestingly enough, you could have bought a brand-new VW Beetle – base trim – and driven away from the dealer with $146 left in your pocket. It stickered for $1,639 – and for that you didn’t get air conditioning or an automatic transmission or power anything at all. You got two doors, glass – and a heater.
Cars like the new Accent/Versa/Mirage all come standard with AC and power for pretty much everything; some come standard with cruise control. They can cruise without strain at 75, too – which was approaching the ’67 Beetle’s top speed. And they can be counted on to run without issues for 15-20 years and 150,000-plus miles – which was a lot longer than a a ’67 Beetle would run without a rebuild of its air-cooled engine. Which didn’t cost nothing.
If you take the superior longevity of the modern car into account, it costs less than a ’67 Beetle did over the course of its useful service life.
This in spite of all the air bags and government-imposed cost-adding.
Yet it nonetheless costs a fortune to own a car today vs. what it cost back in ’67. And the reason for that has nothing to do with the car, per se. It has everything to do with the serial costs imposed post-purchase by the government, which end up costing you almost as much as the car itself.
Probably the single biggest cost added is the cost of insurance, which the government forces every car owner to buy. Whatever you think about the morality of forcing people to pay for hypothetical damages they haven’t actually caused, it is inarguable that forcing everyone to buy insurance has made insurance more expensive for everyone. For two reasons.
The first reason is that when the government forces you to buy something, you are going to be forced to pay more for it. Without the power to not buy it, there is no restraint upon the cost of it – so you pay what they say because what choice do you have?
But there is another, subtler reason.
By forcing everyone to buy insurance, the government has incentivized fragile – and expensive to fix – car design. Examples of this include the use of aluminum, easily bent and costly to unbend as well as the use not only of plastic – easily torn or cracked and usually not fixable at all – for front and rear clips that can be “totaled” in what used to be supermarket parking lot scuffs that could be buffed out without fixing anything at all.
Such flimsy design would be avoided if people weren’t forced to pay for it. Put another way, if those who chose to buy such flimsy cars had to pay full freight for the risk they chose to assume but others could chose not to pay for it at all, then such flimsy design would be extremely uncommon rather than ubiquitous – because it would be too expensive to “cover” for those who purchased cars so designed.
In any event, insurance is devastatingly expensive. The average cost of a full-coverage policy is $1,427 per year – for a driver with a “clean” DMV record and a good credit score (yes, they dun you higher for lower credit, irrespective of your record of accidents or tickets). If you have a couple of traffic tickets to your credit you will pay more.
It works out to about $278 in 1967 dollars – a sum equivalent to about 20 percent of the cost when new of an entire 1967 Beetle. Put another way, that $278 in 1967 dollars paid each year for six years – $1,668 – would come to more than the cost of the ’67 Beetle itself ($1,639).
Even if you pay “only” $500 annually for insurance, you’re still paying through the nose. Over a ten-year period, you’re paying $5,000 to be precise – and that’s not a small sum. It amounts to about a third the cost of a new car such as the Hyundai Accent or Nissan Versa or Mitsubishi Mirage mentioned earlier.
Stated another way, that $15k new car actually costs you $20k – and that’s just counting the cost of insurance. If you add the costs added by the government for such things you’re forced to buy if you own a car such as mandatory annual registration renewals and inspections – which have also increased in cost not so much because of inflation but rather because you can’t say no – plus the ongoing taxes many are forced to pay every year as the condition of being allowed to continue owning the car, even if it’s paid off – the total cost ends up being half or more what you paid for the car itself.
And that’s why cars are expensive, even though the cars themselves actually aren’t.
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