How BLS Measures Price Change for Used Cars and Trucks in the Consumer Price Index
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 car and truck index is published monthly at the U.S. level and for each of the four census regions. Index numbers are not published at the primary sampling unit level (cities). The Used Cars and Trucks Index is comprised of used cars and trucks from two through seven years of age.
|Item||Relative Importance December 2016|
|New and Used Motor vehicles||6.403|
|Used Cars and Trucks||1.986|
|Leased Cars and Trucks||.543|
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.
Pricing. The Bureau of Labor Statistics (BLS) does not collect price information on used cars and trucks. All price information for used cars and trucks used in the CPI comes from the N.A.D.A. Official Used Car Guide (NADA). All prices are adjusted for depreciation of the vehicle.
A monthly price relative is calculated for each observation. The price relative is based on a three month moving average of the current and last two months depreciation adjusted prices. So for month t, we are comparing the price (Dt+Dt-1+Dt-2)/3 to the price (Dt-1+Dt-2+Dt-3)/3, where Dt is the depreciation adjusted price for month t.
The current CPI sample of used cars and trucks was chosen with the J. D. Power Information Network. This is a network of car dealers who report sales of used vehicles to the J. D. Power Company. From the universe of 2 through 7 year old vehicles, a sample of 480 vehicles was chosen.
The CPI sample consists of 480 observations. These observations are replicated in all of the CPI areas (after tax adjustments).
The sample is updated by one model year each September through November. This maintains the same age vehicles over time. If a production model is discontinued, it is replaced by a comparable model. A complete resampling is scheduled every 5 years.
Quality adjustments are made in the CPI for new and used vehicles based on manufacturers costs obtained by the BLS 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.
Issues associated with used cars and trucks
Although the CPI uses the N.A.D.A. Official Used Car Guide to obtain prices, other sources are available. The two most commonly used sources are the Kelley Blue Book and the Black Book . 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 auctions. These are wholesale auto auctions only open to professional buyers. Manheim runs a chain of these auctions and has thousands of vehicles to use as source data. They do not do adjustments for depreciation or quality changes. The index comes out monthly.
Adesa Auto Auctions is another chain of auto auctions. They have various data available on used car pricing trends but dont have a specific price index available.
Automotive News is a trade publication covering the Automobile industry. It sometimes has information on used car and truck pricing trends
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 at www.bls.gov/opub/hom/pdf/homch17.pdf or you may call the Information and Analysis Section of the CPI at 202-691-7000.
Last Modified Date: March 1, 2017