How BLS Measures Price Change for New Vehicles in the Consumer Price Index
The New Vehicle 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 vehicle index is published on a monthly basis for the U.S. and the four regions for which CPI data are published.
New vehicles is a subcomponent of the New and Used Motor Vehicles component of the CPI. The individual items which comprise the new and used motor vehicle index, together with their relative importance values within the U.S. city average of the CPI for All Urban Consumers (CPI-U), as of December 2017 are as follows:
|New and Used Motor vehicles||7.080|
|Used Cars and Trucks||2.402|
|Leased Cars and Trucks||.642|
The New Car index is composed of subcompact, compact or sporty, intermediate, full, luxury or status cars.
The New Truck index is composed of pickup trucks, vans, and specialty vehicles. Specialty vehicles include sport/cross utility vehicles.
|Item||Number of Observations, January 2017|
Selection and Identifying Characteristics Priced
Information from the Telephone Point-of-Purchase Survey (TPOPS) is used to select the dealerships surveyed for the new vehicle index. All new vehicles sold for consumer use are eligible for selection. A disaggregating process based on dollar volume sales is utilized to select the unique make, nameplate, and model to be priced for the index. Each vehicle is described in detail by specifications including make, nameplate, model, engine, transmission, doors and options.
Estimated Transaction Price and Price Adjustments
The price used in the index is an estimated transaction price based on sales for the model over the past 30 days. Prices are collected for the base price, destination charge, options, dealer preparation charges and applicable taxes. Averages are then estimated (based on respondent feedback) to adjust the price for markups, dealer concession or discounts, and consumer rebates.
Finance Charges are Excluded
Finance charges are excluded from the Consumer Price Index and any incentives associated with low-interest financing are excluded from the discount or rebate amount. (1)
Model Year Change-Over and Quality Adjustments
Model year change-over, when the new model replaces the old model occur in the index each year. The substitution to the new model is done 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. While new models are most often introduced in the fall; they can be introduced anytime during the year, and are generally are reflected in the CPI beginning in September and continuing through February.
Quality adjustments are based on resource cost 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 switches in gasoline content due to mandated air quality requirements. (2)
For additional details please see Guidelines for Quality Adjustments of New Vehicles Prices. https://www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf
Reports on Quality Changes Each year, the BLS publishes a report on the quality changes to new models. The report is based on the Producer Price Index. It 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 https://www.bls.gov/ppi/motorvehicles.htm
Why the PPI and CPI New Vehicle Indexes May Show Different Movements
- PPI captures the price from manufacturer to dealer, while CPI captures the price from dealer to consumer, so a trend toward increasing or decreasing dealer profits may cause some differences in the indexes.
- There may be a lag in price changes from the manufacturer being passed on to the consumer.
- The pricing date for the PPI is on one specific day in the middle of the month. While the CPI covers the entire month and based on estimated transaction prices over the past 30 days. A possible lag in price change may appear. For example, the PPI September index may use the price as of September 14, while the CPI September index will estimate a transaction price based on sales over the past 30 days prior the day pricing. A new discount announced on September 10 would show up in the September PPI but may miss most sales used in the September CPI.
- Prices of imported cars may have different movement than domestically produced cars (exchange rate, high demand for some models, etc.). Prices for these vehicles affect the CPI but not PPI.
- Model year changeover for PPI shows up almost entirely in October, but the CPI spreads this change over several months.
- Changes in low financing rate programs are captured in PPI but not CPI.
- Quality adjustment for emissions is captured in the PPI but not CPI.
- CPI resamples 25 percent of the vehicles each year, while PPI does a complete resample every 5 years, so the mix of vehicles may be different.
- Changes in sales taxes and other taxes on cars would cause the CPI to change but would not affect the PPI.
- Some dealer incentives may not be passed on to consumers. For additional details, please see "Price Measure of New Vehicles: A Comparison" which was originally published in the July 2008 Monthly Labor Review. See https://www.bls.gov/opub/mlr/2008/07/art2full.pdf
Other sources of information on new vehicle prices
The CPI publishes monthly price indexes for purchases of new vehicles, but does not publish averages prices of new vehicles. A source for averages price data would be the Bureau of Economic Analysis (BEA). (3)
Other useful websites for new vehicle information are Ward’s Automotive, Edmunds and Kelly Blue Book.
(1) Monthly Labor Review, “Changing the Item Structure of the Consumer Price Index,” Out of scope items, available at https://www.bls.gov/opub/mlr/1996/12/art3full.pdf
(2) CPI Detailed Report, "Treatment of Mandated Pollution Control Measures in the CPI," (September 1998).
(3) Instructions for access to BEA data:
- 1. Go to BEA's website: www.bea.gov;
- 2. Click on 'Gross Domestic Product' (under the National section)
- 3. Scroll across the page to 'Supplemental estimates'
- 4 Click on 'Underlying detail tables' (1st item)
- 5. Click on 'Begin using the data'
- 6. Click on '7 - Motor vehicle output'
- 7. Click on 'Table 7.2.5S'
- 8. Scroll down to line 40 which begins the average expenditure per car section.
Additional information on the Consumer Price Index can be found in the BLS Handbook of Methods, chapter 17, "The Consumer Price Index," Bulletin 2490 (1997). The current version of this chapter is also available on the BLS Internet site http://stats.bls.gov/opub/hom/homch17_a.htm or you may call the Information and Analysis Section of the CPI at 202-691-7000.
Last Modified Date: February 22, 2018