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Consumer Price Index
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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, leased cars and trucks, and car and truck rental, 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. Vehicle classifications from Environmental Protection Agency (EPA) are used to assign each unique vehicle to either the new cars or new trucks index.
Relative importance
The relative importance of an item category is its percent of the CPI weight as of December of the most recent year.
| Item | Relative importance |
|---|---|
|
Transportation |
15.898 |
|
Private transportation |
14.828 |
|
New and used motor vehicles |
6.420 |
|
New vehicles |
3.684 |
|
Used cars and trucks |
2.012 |
|
Leased cars and trucks |
0.517 |
|
Car and truck rental |
0.139 |
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.
The size of the J.D. Power new vehicle dataset depends on the transaction volume and number of participating dealers at any given time, but we typically receive data on 250,000 transactions per month, reported by participating dealers across the country. The majority of nameplates purchased across the country are represented in the dataset. All transactions reported in the dataset are used in the new vehicle index except for vehicles specifically referenced as fleet vehicles, police vehicles, work trucks, or cargo vehicles.
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 index calculation
The price used in the new vehicles index is a geometric average transaction price for each vehicle type within each index area.
The calculation of price change for new vehicles is unlike other CPI categories in that it is based on a combination of year-over-year (YOY) relatives and a cyclical component. Monthly vehicle prices tend to decline over the model year, which can bias the trend in a price index. The year-over-year relatives provide an unbiased estimate of the trend but no information on short-run changes in the new vehicle market. We combine the year-over-year measure with a statistical component of the monthly index detrended with a statistical filter to create a measure that is both accurate in the long-run and informative in the short-run.
Monthly price relatives are constructed by comparing vehicle prices in current (t) and previous (t-1) months. Price comparisons are made for each vehicle where we observe both a month t and a month t-1 price in the same CPI area. Price comparisons are made for all eligible vehicles, including recently introduced models. The price for a vehicle is tracked month-to-month for the same model year vehicle until the next model year iteration of a vehicle exceeds the sales of its successor. The price change from the old model year to new model year vehicle is then shown for one “changeover” month, and the new model year vehicle replaces the old in calculations in subsequent months. Price comparisons are aggregated with an expenditure-weighted Tornqvist formula to form area-level indexes. These indexes are used as inputs for the high-frequency component used in the new vehicles index. The high-frequency component is used as an indicator of short-run fluctuations. This component is then combined with a year-over-year relative as shown in the formula below.
A year-over-year (YoY) relative is calculated to measure long-term price trends in the vehicle market. To calculate a YoY price comparison for a single observation, each vehicle that was purchased in the current month is mapped to its previous model year equivalent by CPI analysts. We then compare the price of each vehicle in the current month (t) to the price of its previous model year equivalent in the same calendar month of the previous year (t-12). Vehicles that cannot be mapped to a previous model year equivalent (such as models in their first year of existence) and vehicles that have been redesigned are not included in YoY calculations until 12 months after the vehicle’s introduction. Quality adjustments are applied where identifiable quality differences exist across model years. Vehicle-level YoY relatives are aggregated to form area-level YoY relatives using the Tornqvist price index formula with expenditure share weights. The 12th root of each 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 indexes are then adjusted using the time series filter to model the latest cyclical trend (the high-frequency component described above), which more accurately represents short-run fluctuations.
Price change for each geographic area in the CPI for new vehicles is calculated as:
Note: With the January 2023 data release, the CPI for new vehicles introduced a methodology improvement to the time series filter that estimates the most recent cyclical trend/short term fluctuations. Prior to January 2023, this value had been calculated using an estimate of 
made in the current month, t, using an historical series that included the latest data. Starting in January 2023, will be estimated using the data only up to t-1.
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
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.
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. Additional information is available in the Quality Adjustment in the CPI: New Vehicles document.
Special Relative Calculation
There are two special relative calculations (SRC) available in this CPI category for both new cars and new trucks. These SRC indexes are a subset of the category new vehicles containing only prices collected for new cars and new trucks respectively. These special indexes are based on a substantially smaller sample.
Data
Access data for new vehicles and the special relative calculations (SRC) for new cars and new trucks in our online database.
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 and will not account for approximately up to nine percent of total new vehicles transactions. 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.
Additional information
Information on trends in leased cars and truck prices can be obtained from several other sources including Ward’s Automotive, Kelley 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.
Last Modified Date: July 8, 2024