25 Years On, Are Cars Really More Expensive?

Derek Kreindler
by Derek Kreindler

That’s the question that Marketplace is asking, using the Honda Accord as a yardstick. In 1989, a Honda Accord with 98-horsepower, no ABS, crank windows and no A/C. In 1989 dollars, that would set you back $11,700.

A base model 2014 costs $21,955 in today’s dollars, or $11,500 25 years ago. Obviously, there’s a massive qualitative and quantitative advantage between the two cars, with the newer car offering better performance, safety, fuel economy and size.

There are plenty of economic factors (wages, cost of living etc), but as Marketplace notes, the cost per mile figure (when depreciation, fuel costs and maintenance) have stayed constant and financing terms have never been better. For those of you who were around in 1989 and able to chip in with your experiences

Derek Kreindler
Derek Kreindler

More by Derek Kreindler

Join the conversation
4 of 156 comments
  • TomLU86 TomLU86 on Sep 26, 2014

    Given a choice between a brand new 89 Accord or a 2015 Accord, I'd pick the 1989. I just like it more--it looked better and was more entertaining. Objectively, the only area it is better is visibility. Yet even I am the first to conceded that USUALLY today cars cost the same or less, and we get more features, safey, and performance, and usually more mpg. Some reasons they cost less--in 1989, car designs took more time and labor to assemble. The cars sold in the US were built in the US, Japan, or Europe, all relatively high wage countries. Today, even when assembled in high-wage countries, many of the components are from Mexico or China (low-wage). Non-union US assembly plants in the south pay lower wages. So that has absorbed much of the cost increase we should have expected from more content, such as 10 airbags per car, stabiitrak, anti-lock brakes, power everything, etc. Short of moving more actual assembly from US, Japan, Euro, to Mexioc and China or India, this trend has largely played out. The ability to lower costs here is not 'infinite' as in computers. As automakers start trying to improve MPG to meet the US govt's onerous MPG and safety and emission requirements, the price of vehicles will start to go up.

  • Fred Fred on Sep 26, 2014

    I bought new a 1985.5 Mustang SVO for $12,000. It was a lot of money then. I compare it to my 2007 Audi A3 that I bought used in 2008 for $22,000. The Audi, had more features, more reliable and put together better. To me that suggests cars are indeed less expensive today. Then looking at a new A3, it's at $35,000-$40,000 and I suspect a 2015 Eco-Boost Mustang to not too far behind. That seems expensive.

  • George B George B on Sep 26, 2014

    Mass market products don't get magically less expensive in real dollars. Engineers put many long hours into figuring out how to deliver more out of less. Digital electronics get cheaper because engineers keep figuring out how to fit more transistors onto a wafer of silicon. Engine power output vs. displacement goes up because mechanical engineers figure out how to get more peak power out of a given mass of engine metal without having them self-destruct. Other mechanical engineers put lots of work into reducing parasitic losses on many fronts to improve fuel economy. Yet another set of mechanical engineers put in long hours figuring out how to improve crash safety within the cost constraints of a mass market product. What consumers experience as automotive "progress" is the cumulative effect of lots of man-hours of work. I own a 2014 Honda Accord at the relatively high EX-L trim level. It's a really nice mass-market car, but a luxury car buyer from the past wouldn't mistake it for a luxury car. A luxury car uses higher quality materials with more labor intensive attention to detail while a mass-market car uses more parts stamped out of molds without a lot of secondary machining/finishing. Cast aluminum vs. machined aluminum. Molded plastic vs. carved wood. Vinyl and low-grade leather vs. high-grade leather.

  • Stingray65 Stingray65 on Sep 26, 2014

    One reason many people wrongly perceive that things have gotten more expensive over time is that they fail to compare similar levels of quality. I suspect that a larger portion of 1989 Hondas were sold with a relatively low-line trim level and that today a larger portion are sold with high-line trim, so people end up comparing a bare-bones base car price of yesteryear with a top-of-line loaded price today and being shocked. Same with electronics - how many people bought a 60 inch TV in 1989? Nobody - the biggest then was about 32 inches, but people don't compare a 32 inch today to the 32 inch then, they compare the 60 inch with stereo sound, internet connections, etc. The fact is bare-bones products and brands don't sell very well because people seem to have the money and/or debt capacity to buy the deluxe versions today - just look at how much sales of high-end brands in virtually every category have increased over the last 25 years, and how most low-end brands are desperately attempting to go up-market to join the party.