How BLS Measures Price Change for Leased Cars and Trucks in the Consumer Price Index
The Leased Cars and Trucks index became part of the Consumer Price Index (CPI) market basket during the 1998 CPI revision. Publication of the Leased cars and trucks index for the urban United States on a monthly basis began in January 2002. Price indexes for smaller geographic areas are not published because sample sizes are not sufficient. As of January 2017, the Leased Cars and Trucks index had a sample of 279 observations.
The Leased Cars and Trucks index is a component of the New and Used Motor Vehicles expenditure class, which is part of the CPI's Private Transportation component in the Transportation major group. Table 1 contains the item strata that comprise the New and Used Motor Vehicle index, together with their December 2017 relative importances (their shares of the weight of the U.S. city average of the CPI for All Urban Consumers (CPI-U):
Table 1: Relative Importance of Selected Transportation components of the CPI for All Urban Consumers (CPI-U): U.S. city average, December 2017
|Item||Relative importance All Items(percent)||Relative importance New and Used Motor Vehicles (percent)|
New and used motor vehicles
Used cars and trucks
Leased cars and trucks
Car and truck rental
Unsampled new and used motor vehicles
The weight of leased cars and trucks in the Consumer Price Index consists of consumer spending on leased cars and trucks. The index covers leases on all classes of new consumer vehicles, including; subcompact cars, compact or sporty cars, intermediate cars, full sized cars, luxury or status cars, pickup trucks, vans, and specialty vehicles, including sport/cross utility vehicles.
Selection of Retail Outlets and Items
The selection of retail outlets, where the CPI gathers prices for the Leased Cars and Trucks index, is based on information from the Telephone-Point-of-Purchase Survey (TPOPS). On the initial visit to a retail outlet, CPI data collectors use a disaggregation process to select the sample of vehicle leases whose prices they will follow over time for the index. The disaggregation process is a probability sampling method that uses the proportion to dollar volume of sales to select from among all leases the retail outlet offers to consumers for new vehicles; leases for used vehicles are not eligible. The CPI data collector describes each selected vehicle lease in detail including the vehicle make, nameplate, model, engine, transmission, options, and lease terms. The lease terms include items such as the number of months of the lease term, the down payment, the residual value, the depreciation amount and the total rent charge.
Estimated Transaction Price and Price Adjustments
The value that the CPI uses in the Leased Cars and Trucks index is an estimated transaction price that reflects the vehicle base price, destination charge, options, dealer preparation charges, applicable taxes, depreciation, and lease rent charge (the finance fee portion of a monthly lease payment, similar to interest on a loan). The estimated transaction price also includes the respondent's estimate for the price markup, dealer concession or discount, and consumer rebate. The basic formula used to calculate the total monthly lease payment used in calculating the Leased Cars and Trucks index:
- Base Price of Leased Vehicle
- + Transportation to Dealer
- + Total Price of Packages & Options
- + Dealer Prep and Misc. Charges
- + Additional Dealer Markup
- - Dealer Concession or Discount
- = Capitalized Cost (similar to the purchase price of a vehicle)
- - Downpayment (cash paid up front by the customer)
- - Rebate
- - Other Capitalized Cost Reductions
- + Tax (if included in Capitalized Cost)
- + Other Additions to Capitalized Cost
- = Adjusted Capitalized Cost (amount used to calculate base monthly payment)
- - Residual Value (value of the vehicle at the end of the lease)
- = Depreciation Amount (the total amount charged for the decline in value)
- + Total Lease Rent Charge (the finance fee, similar to interest)
- = Total of Base Monthly Payments/ Lease Term (the number of months in the lease)
- = Base Monthly Payment
- + Monthly Sales/Use Tax
- = TOTAL MONTHLY LEASE PAYMENT
Model Year Change-Over and Quality Adjustments
Each year, the CPI performs a model year change-over procedure for all vehicle indexes. For the Leased Cars and Trucks index, the CPI replaces the old model with the new one when 50 percent or more of the leases written during the previous 30 days, for the nameplate being priced, are for the new model year vehicle. While new models may be introduced anytime during the year; they are most often introduced in the fall and are generally reflected in the CPI in September through February.
The Leased Cars and Trucks index uses the same quality adjustment values to adjust for any quality changes between the new model year and the old model year vehicle used in the CPI New vehicles index. These values are based on costs provided by vehicle manufacturers for categories such as: reliability, durability, safety, fuel economy, maneuverability, speed, acceleration/deceleration, carrying capacity, and comfort or convenience. The CPI also makes adjustments when equipment is added or deleted from the tracked model, but does not make adjustments for changes in mandated pollution controls. (1)
For additional details please see "Guidelines for Quality Adjustment of New Vehicle Prices" available on the BLS Internet site at www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf.
Reports on Quality Changes
The Producer Price Index program publishes an annual report on the quality changes to new models. The report provides the average model year changes in invoice price and a retail equivalent price, as well as the estimated value of quality changes. These press releases are available at www.bls.gov/ppi/motorvehicles.htm.
Other sources of information on leased cars and trucks:
- The Federal Reserve Board
- Association of Consumer Vehicle Lessors
- Ward's Automotive
- Kelly Blue Book
(1) CPI Detailed Report, "Treatment of Mandated Pollution Control Measures in the CPI," (September 1998).
Additional information on the Consumer Price Index can be found in the CPI chapter of the BLS Handbook of Methods (PDF). For more information, call the Information and Analysis Section of the CPI at (202) 691-7000.
Last Modified Date: February 23, 2018