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Measuring Price Change in the CPI: Used Cars and Trucks

The used cars and trucks index, a component of the private transportation index, is included in the transportation group of the Consumer Price Index (CPI). The used cars and trucks index is published at the U.S., region, division, and local level.

Item definition

The used cars and trucks index is comprised of used vehicles that are between two and seven years of age. Subcompact, compact or sporty, intermediate, full, and luxury cars are all included in the index. Light trucks in the index include pickup trucks, vans, and specialty vehicles like sport/cross utility vehicles.

All used goods and services are eligible for spending weight purposes but due to logistical issues, are very difficult to price, and thus as a general rule are excluded from pricing. Used cars and trucks are one of only a few categories that are an exception to the general rule. The weight of used cars and trucks in the Consumer Price Index is determined by spending on used cars and trucks, less trade-ins on new and used vehicles and other sales of consumer owned vehicles.

Expenditure methodology

General CPI methodology

The CPI measures inflation by tracking retail prices of a good or service of a constant quality and quantity over time. Tracking retail prices allows CPI to capture changes in out-of-pocket household spending over time. Each month, the various item indexes reflect the observed price changes, aggregating up to the all items CPI.

In the aggregation process, each item index is assigned a relative importance, or weight. The weight of each item in the CPI is determined using the Consumer Expenditure Survey (CE) which collects information from the nation’s households and families on their buying habits (or expenditures), income, and household characteristics. Goods and services that consumers spend the most on will be the most heavily weighted. Additional information on CE and how weights are calculated and updated can be found in the CPI and the CE sections of the BLS Handbook of Methods.

Used cars and trucks methodology

Trade-ins, at their market value, continue to be netted out of the price of purchased used cars and trucks. In addition, the market value of trade-ins on new vehicles is netted from used vehicle purchases, rather than new vehicle purchases. Outright sales of vehicles from one consumer to another, even if a dealer acts as an intermediary, are netted against the corresponding purchase as this type of transaction is considered an intrapopulation exchange of wealth; there is no net change in used vehicle consumption. The remaining used vehicle purchases are the CPI expenditure weight for this item. They comprise the sale of vehicles by the business and government sectors to consumers, plus dealer markup on used vehicles previously owned by consumers.

Relative importance

The relative importance of an item category is its percent of the CPI weight as of December of the most recent year.

Table A. Relative importance, December 2023
Item	Relative importance
New and used motor vehicles	6.420
New vehicles	3.684
Used cars and trucks	2.012
Leased cars and trucks	0.517

Sample selection

The CPI’s used cars and trucks sample is designed using data from the J.D. Power Information Network (JDPIN), a network of car dealers who report sales of used vehicles to the J.D. Power Company. A sample of 480 two-to-seven-year-old vehicles was selected from the JDPIN based on probability proportionate to sales. This national sample of 480 observations was proportionally allocated using 2010 Census CPI stratum populations to each of the ten J.D. Power Valuation Services NADA values regions. The ten largest CPI sample areas within each region were assigned as “Parent” regions. Prices were then replicated in all other “Children” CPI areas within each region with appropriate weight adjustments. Taxes are then applied to each observation based on their assigned tax jurisdiction within each individual CPI sample area. When sample rotation occurs, the entire sample is rotated at the national level. The CPI last rotated the used cars and trucks sample in 2018. The Washington CPI office collects prices monthly for this sample, using J.D. Power Valuation Services. Note that, while the sample is built using transaction data from JDPIN, monthly vehicle price estimates are collected from J.D. Power Valuation Services.

The sample is updated by one model year each September so that each vehicle in the sample maintains the same age over time. If a production model is discontinued, it is replaced by a comparable model. This process of refreshing the sample is called “model changeover”. The entire sample is updated when resources become available.

Price change and quality adjustment

The CPI does not collect price information on used cars and trucks ourselves; all price information for used cars and trucks used in the CPI comes from J.D. Power Valuation Services. All prices are adjusted for depreciation of the vehicle using the formula below.

Price change

The CPI collects data on the first of each month from J.D. Power Valuation Services. The prices obtained from J.D. Power Valuation Services represent estimated vehicle values for each vehicle in the sample at the time of the data download. The valuations obtained on the first of each month are compared against the valuations obtained on the first of the previous month. Before a price relative is calculated by directly comparing prices from the current period and previous period, an adjustment is made for depreciation on prices for both time periods.

The CPI adjusts each used vehicle quote for depreciation to account for the reduced value that accrues throughout the duration of a year. The CPI has developed a formula that calculates a depreciation adjustment for each observation in the sample. The calculation uses a price ratio between the sampled car (vintage v) and its one model year younger counterpart (vintage v+1) to determine an adjustment.

Equation 1: calculation of the depreciation adjusted price

In January 2024, the CPI updated the mileage adjustment methodology employed by the used vehicle component index.

Prior to January 2024, each observation in the used vehicle component index was assigned a single, stable mileage amount that remained unchanged throughout the year. Both vehicles in the depreciation equation above were assigned the median mileage amount observed in the JDPIN data used to build the sample. Inherently, the younger vehicle in the above equation was assigned a lower mileage amount than the older vehicle, since it has been driven for one less year.

In January 2024, the CPI began using an average monthly mileage amount based on the age of the sampled used vehicle. This new mileage adjustment is based on an exponential decay curve, which means additional miles at the higher end are less of an absolute dollar change than adjustments made for lower mileage amounts. In the formula above, P_t^v+1 and P_t^v will both be assigned a higher average mileage each month throughout a given year. This increase in assigned mileage will have a negative effect on both component prices which serve as an input to the final depreciation adjusted price. The negative effect on both component prices is mitigated, in the long term, by the increase in N in the formula above, each month.

Quality adjustment

Quality adjustments are made in the CPI for new and used vehicles based on manufacturers’ costs obtained by our analysts. The quality adjustments that are made to used cars and trucks are the same adjustments that were made to the vehicles when they were new; they just occur in later years. Because the improvements are assumed to have depreciated at the same rate as the vehicle itself, the adjustment amount applied to used cars and trucks is appropriately depreciated.

Data

Access data for used cars and trucks in our online database.

Additional information

Although the CPI uses the J.D. Power Valuation Services values to obtain prices, other sources are available. The two most commonly used sources are the Kelley Blue Book and the Black Book. Mention of external data sources should not be considered as an endorsement by BLS.

Information on trends in used car and truck prices can be obtained from several other sources.

Manheim Auto Auctions constructs a price index based on sales at their wholesale auto auctions that are only open to professional buyers. Manheim runs a chain of these auctions and has thousands of vehicles to use as source data. Note that they do not do adjustments for depreciation or quality changes and its index comes out monthly.

Adesa Auto Auctions is another chain of auto auctions; they have various data available on used car pricing trends, but do not produce a specific price index.

Automotive News is a trade publication covering the Automobile industry that sometimes has information on used car and truck pricing trends.

Additional information may be obtained from the Consumer Price Index Information Office by email or calling 202-691-7000. Information on the CPI's overall methodology can be found in the BLS Handbook of Methods.

Last Modified Date: February 28, 2024