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Regulation Continues to Increase Car Prices

Evidence continues to mount that strict fuel economy standards are making cars and trucks more expensive than they would be otherwise. Up through 2008, new vehicle prices—adjusted for quality and the composition of the fleet—had declined steadily for decades. Since then, however, prices have stopped falling and are growing at almost the same rate as general inflation.

Given that the average new vehicle costs $33,661, the price of a typical vehicle is $7,698 higher than if the pre-recession relative price trend had continued.

The gap between what today’s cars would have cost at the pre-recession trend and actual prices continues to grow. A year earlier, the gap was $7,046; a year before that it was $6,059. Technological progress, which tends to make vehicles cheaper, is not keeping pace with regulation, which makes them more expensive.

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