The $50,000 Question: How Did Vehicles Get So Expensive?

You’re reading Dispatch Markets, a weekly newsletter on economics featuring Scott Lincicome, Kyla Scanlon, Karl Smith, Marian Tupy, and Adam Ozimek. To access more Dispatch reporting and analysis, become a member today.

In September last year, new vehicle prices broke a record, passing $50,000 for the first time. My intuition tells me this seems far too much for the typical household to spend on a new vehicle. But normal people do it all the time. Is it a problem? How did we get here?

Many factors contribute to the high price of cars. Policy certainly has played a role. However, a substantial part of the path to the $50,000 vehicle is due to consumer preferences.

Does this mean consumers have little room to complain? Turns out that consumers are both getting what they want and have some legitimate reason to gripe. It’s a bit paradoxical. But the important thing is, more affordable vehicles are possible.

Sticker Shock