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Consumer Price Index

Measuring Price Change in the CPI: New vehicles

The new vehicles index, a component of the private transportation index, is included in the transportation group of the Consumer Price Index (CPI). Together with the index for used vehicles, it makes up the new and used motor vehicles index. The new vehicles index is published at the U.S., region, division, and local level.   

Item definition

The new cars index is composed of subcompact, compact or sporty, intermediate, full, and luxury cars. The new trucks index is composed of pickup trucks, vans, and specialty vehicles; specialty vehicles include sport and cross utility vehicles.

Data source

The new vehicles index is estimated using a transactions dataset purchased from J.D. Power that includes observed transaction-level prices and detailed vehicle information. Each observation includes a transaction price as well as a set of 40 variables including rebate values and vehicle characteristics. Sales tax rates are applied by BLS for index calculation.

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 2021
Item Relative importance

Transportation

18.182

Private transportation

17.404

New and used motor vehicles

9.218

New vehicles

4.105

Used cars and trucks

4.143

Leased cars and trucks

0.728

Sample selection

The J.D. Power new vehicle sample size is approximately 250,000 transactions per month, purchased from participating dealers across the country. The vast majority of nameplates purchased across the country are represented in the dataset. Vehicles specifically referenced as fleet vehicles, police vehicles, work trucks, or cargo vehicles are removed.

The J.D. Power data are grouped into “Designated Market Areas” that correspond to all the major cities in the current CPI sample and a large pool of small and mid-sized cities. These Designated Market Areas are mapped to the 32 index areas that represent the CPI geography.

Price change and quality adjustment

Each year, the CPI performs a model year change over procedure for all vehicle indexes. For the new vehicles index, the CPI replaces the old model with the new one when the dollar sales of the new model are 50 percent or more of the total sales for the vehicle over the past 30 days (“the 50 percent rule”). 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 beginning in September through February.

Price change and index calculation

The price used in the index is a geometric average transaction price for each vehicle type within each index area. New vehicles are reviewed in accordance with CPI analyst procedures. This includes review for model year comparability and quality-adjustment when necessary, using data received by BLS from automobile manufacturers.

Monthly price relatives are constructed based on comparing vehicles in month t with month t-1 using the Tornqvist price index formula with expenditure share weights. The 50 percent rule is used to determine the timing of changeovers, and changeover relatives are based on the observed expenditure shares for the model years involved in the changeovers. This index provides the input for the high-frequency component used in the final new vehicles index.

A year-over-year (YoY) relative based on comparing vehicles in month t with month t-12 is calculated using an expenditure weighted Tornqvist formula, as well. The 12th root of the YoY relative is taken to scale the price change down to a monthly frequency. This method allows the CPI to estimate the price change across model years for similarly aged vehicles. The resulting YoY price index is then adjusted using a time series filter to model the latest cyclical trend (the high frequency component described above), which more accurately represents short-run fluctuations.

Additional information on the new vehicles index formula methodology is available in the working paper: “A New Vehicles Transaction Price Index: Offsetting the Effects of Price Discrimination and Product Cycle Bias with a Year-Over-Year Index.”

Quality adjustment

Quality adjustments are based on costs provided by manufacturers in categories such as reliability, durability, safety, fuel economy, maneuverability, speed, acceleration/deceleration, carrying capacity, and comfort or convenience. Adjustments are also made when equipment is added or deleted from the tracked model. Adjustments are not made for changes in gasoline content due to mandated air quality requirements. Additional information is available in the Guidelines for Quality Adjustment of New Vehicles Prices document.

Data

Access data for new vehicles in our online database.

Additional information

Information on trends in leased cars and truck prices can be obtained from several other sources including Ward’s Automotive, Kelly Blue Book, and Edmunds.com. Average price data for new vehicles is available from the Bureau of Economic Analysis. The mention of these sources does not constitute or imply endorsement, recommendation, or favoring by the U.S. Bureau of Labor Statistics.

The Producer Price Index (PPI) program publishes an annual report on 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 reports are available on the PPI Archived Reports on Quality Changes for Motor Vehicles webpage.

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 CPI section of the BLS Handbook of Methods.

Operational information

To meet publication deadlines, the CPI program receives data from J.D. Power on the 25th and last day of the reference month. Compared to the experimental new vehicles index (R-CPI-U-NV), which received the dataset on the 5th of the reference month, the CPI will not include approximately nine percent of total new vehicles transactions going forward. Internal research concluded that this data truncation does not have a statistically significant impact on item-level relative calculation. The reduced sample showed only minor compositional differences from the full sample. This is the only notable change between the research methodology used for the R-CPI-U-NV and the methodology now used in production.

Last Modified Date: May 11, 2022