By Ed Wallace
A recent column in the Toronto Star discussed how Disney World is evolving into a vacation hotspot for the 1 percenters. When the park first opened in 1971, the piece noted, the cost of admission was only $3.50 per person; the entry fee has been raised 41 times since then, the author said, and today that same ticket costs more than $100.
But as I recall, the 1971 ticket bought one only admission into the park; to ride the attractions one had to purchase a book of coupons. And I could be incorrect, but I seem to remember that both coupon book and entrance fee for California’s original Disneyland cost around $9 in the early 60s, or about $69 in today’s money. Whereas that $100-plus price today would include all the rides.
So, yes, the price of the park is 53 percent higher today vs. 44 years ago, but it’s probably fair to say there’s 53 percent more to do there now than when it first opened. And, while that’s not the point of this column, it’s parallel: Just a few days before the Toronto Star did its exposé on Disney World, Wall Street 24/7 ran a column on seven cars that cost much less today than they did in 1980, 25 years ago.
The Wall Street 24/7 piece began by showing that the Jeep Cherokee costs 6.8 percent less today than it did in 1980. But that’s not a true comparison; the Cherokee back then was more of a full-sized (albeit pitiful-selling) SUV, and today it’s in the compact class.
Most of the vehicles on that column’s list were German products. Looking at the group, it’s hard to say that they chose the right year to prove their point. For one thing, they claim that the Mercedes SL convertible costs 18.2 percent less today than it did in 1980; however, the next couple of years were disastrous for Germany luxury car pricing: That 1980 Mercedes SL listed for just $35,130, but just three years later it cost $49,600. Adjusting that price to today’s money, it comes out to $116,071. And today, here, the Mercedes SL starts at just $84,000, or 28 percent off the 1983 Mercedes cost — although the 18.2 percent lower price as compared to 1980 is fairly close.
The Volkswagen Jetta came in at No. 2 on the list for the largest price reduction, using inflationary dollars at -24.9 percent. That made me wonder about a similar comparison using the 1979 Honda Accord sedan’s price today as compared to then. The original base price was just over $6,395, but to that one had to add freight, air conditioning and the mediocre factory radios that were the norm in those days, and the average selling price with a manual transmissionwas nearly $8,995. Not to mention that the 1979 Accord sedan was actually three inches shorter than today’s Civic sedan, weighed barely over 2,000 pounds, and had about half the horsepower of today’s model. No matter: The 1979 Accordsedan’s price, adjusted for inflation, comes to $28,881.
Like the comparison with the Volkswagen Jetta over the past 35 years, today’s Accord LX sedan is not only substantially larger and more powerful, but also just as fuel efficient; it comes with a superior radio, air conditioning, air bags, anti-lock brakes, power windows and locks, cruise control and tilt wheel — to name but a few standard features that weren’t even available as options back then. And it does all of that for an effective price reduction of over 23 percent from the 1979 version of the Accord.
Like all statistics, however, that one alone does not tell the entire story. That 1979 Accord had over $2,250 mark-up, and that’s not far off the mark-up in some $60,000 SUVs today. (Today the Accord’s mark-up is much, much lower.) Still, the overall sense of value in a car purchase in today’s models as compared to decades in the past is undeniable. Whether it’s the horsepower being delivered, the improved fuel efficiency or safety features such as mentioned above. So, knowing all that, one has to wonder why our automobile sales peaked in 1986 at 16.322 million sales, when the nation’s population went right on growing.
What I mean is that, using the same percentage calculators that determined how many cars cost less today than in the past, one finds that if we purchased the same number of new cars per capita today as we did in 1986, we should be selling 21.7 million vehicles, not the same mid-sixteen-million we are headed toward today.
The question is even more puzzling when you consider that all those incredible features are now standard equipment, add in cars’ improved fuel efficiency and their lower pricing against inflation than in 1980, and factor this in: Today’s average interest rate for a new car loan, according to Bankrate.com, is just 4.38 percent nationally. Compare that to the 21.5 percent car loans from 35 years ago.
Deteriorating (Extending) Turnover Mileage
The miles one can put on their family vehicle within being severely penalized has also improved. When I started the radio show 22 years ago, a common call was from someone whose odometer was quickly approaching 50,000 miles, wondering how much of a financial hit they would take trading it in if they went over 50,000. The answer? Even then it knocked $1,000 to $1,500 off a late-model vehicle’s trade-in value. It got even worse when the car hit 100,000 miles because no new car dealer could keep that car for resale — they couldn’t get a loan on it for a potential customer.
That has most assuredly changed.
There are used cars retailing today for five and six thousand dollars that 15 years ago wholesaled for $750. That additional used car value also offsets the price of a new car substantially. And yet through all of this we actually hit “Peak Car Sales” almost 30 years ago and — despite all the reasons this shouldn’t be true — today struggle to achieve those same sales volumes.
I am absolutely stunned at how many people call the show or write each week who have 150,000 miles or more on their current vehicles and live in suburbia. And yet saying that cars are built better now than they used to be has never really explained why new car sales do or don’t happen. In 1950 the averageengine in a new car lasted only 50,000 miles before it had to be rebuilt. So it’s fair to say each decade from there one saw improved quality and larger sales numbers.
A Monetary Mirror
Judging by what my friends in the industry tell me, particularly about how long people finance their vehicles for today and the huge number of formerly solid middle-class individuals that have to take subprime loans — not to mention the huge increase in the volumes of high-end luxury cars over the past 25 years — it’s rather obvious that our not selling 21.7 million cars today is the ultimate reflection of our shifting financial demographics.
But we don’t see that when we travel around the Metroplex or Texas. Certainly we see new suburbs everywhere we look, and just as certainly newcars, trucks and SUVs everywhere. What we can’t see is that 30 percent of the loans for those vehicles were subprime, where once that percentage was near zero. Or that another car had to be financed for 84 months, where once you couldn’t get more than 60.
And certainly we don’t see the 30 million vehicles that were never built over the past five years because the market couldn’t sell them. That’s another situation that didn’t exist in 1986.
© Ed Wallace 2015
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism. He hosts Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: firstname.lastname@example.org; read all of Ed’s work at www.insideautomotive.com.