The average price paid for a new vehicle is now just shy of $52,000 – which is about $2,000 more than it was only a year ago. Do you remember when it was possible to buy a pretty decent used car for $2,000? I do – because I bought several of them, including a $700 ’74 Beetle I bought in the early ’90s as a daily driver after I got out of college.
Some will say it’s just “inflation” – that things don’t actually cost more. They just cost more dollars. Is the distinction valid?
I typed the $700 I paid for my ’74 Beetle back in the early ’90s into the government’s inflation calculator. It says that it takes about $1,800 today to buy what I bought back then for $700. The trouble with that math is you probably aren’t going to be able to find a daily-drivable old Beetle today for $1,800. Today, that number of dollars will buy you a parts car Beetle that will need a lot of work to be viable as a daily driver. A Beetle equivalent to the one I bought back in the early ’90s for $700 would probably cost you at least $3,000 – based on my survey of asking prices on Facebook Marketplace, Craigs list and so on. I found one – same year as my old one – in about the same general condition; mechanically sound (according to the seller) with faded paint and a well-worn interior. The asking price is $5,500.
You might be able to find one for less. But not for $700 ($1,800 in today’s dollars).
Back in the early ’90s, I was a young guy recently out of college who wasn’t making a lot of dollars yet I was able to easily pay cash for my ’74 Beetle because $700 wasn’t a lot of dollars back then. Today, $1,800 dollars doesn’t buy much, but it’s also a lot of dollars for most of us – me included. And it’s now more than 30 years later. I’m no longer a young guy and for that reason, I ought to be able to buy something like my ’74 Beetle today more easily – on the assumption that I ought to be in better shape financially today than I was back then. But – like probably a lot of people – I’m not. And it isn’t because I’m irresponsible or profligate with money. I haven’t got any debt. I have never even taken out a loan on a car. I have always paid cash for the vehicles I’ve bought, including my ’74 Beetle. And also my ’76 Trans-Am, which I bought just a little bit after I bought the Beetle, which I was able to do because the TA only cost $4,500 back then. The government says that $4,500 back then is the same as $11,700 today except it isn’t – because to buy a car like my TA today would cost easily twice if not three times that much.
My young self was able to buy the TA 30-something years ago. My much older self would have a much harder time buying it today. I’d need to take out a big loan – at double digit interest – and make extravagant payments for the next several years. Now, granted, my TA has become more valuable over the years. But the general point I am trying to make is, I think, valid because it’s supported by the facts. If it were merely “inflation” – the numerical increase in the number of dollars needed to buy a thing – and the number of dollars were were being paid was roughly the same, then “inflation” would be an irrelevance. Put another way, we’d still be able to buy the equivalent of the things we were once able to buy easily just as easily today.
Well, have you tried looking for a daily drivable old car today with only $1,800 in your pocket to spend on it? You might be able to find something that runs and drives, but probably not for very far. When it stops running, it’s doubtful you’ll be able to get it going again with a screwdriver and some RTV/duct tape – as I often did with my ’74 Beetle, which I was able to do because the thing was basically a scaled up Briggs & Stratton lawn mower, a basic mechanical thing with almost no electronics (beyond the coil that fired the plugs, the generator and the battery; any of which could be replaced for less than $150 and with basic hand tools). The modern $1,800 car is likely to be economically unfixable; i.e., when something fails, the cost to replace it will be disproportionate to the value of the car, itself.
To get a decent – mechanically sound/daily-driver-reliable used car today will probably entail spending closer to $5,000. That’s a lot of dollars for most adults with full-time/salaried jobs. How many could pay cash for such a car? How many teenagers/people in their young 20s could?
“Inflation” my swollen left nut.
We are like slowly plucked chickens – who don’t realize we’re featherless until we are.
. . .
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