The Real Cost of New Cars is Falling 2% Per Year
Here's why: In the last 30 years since 1978, consumer prices on average (CPI: All Items) have increased by about 3X (see chart above). During that same period, the CPI for Gasoline Prices has increased almost 6X, meaning that the real cost of gasoline has risen. But the CPI for New Cars has only gone up by less than 2X, meaning that the real cost of new cars has been falling, offsetting some of the sting of higher gas prices for consumers.
Another way to look at it: If new car prices had risen at the same rate as inflation since 1978, new cars would be more than 50% higher than today's prices. And if new cars had increased annually at the same rate as gasoline prices, they be more than 3X higher than current car prices! If the real price of gas is rising, but the real cost of new cars is falling, is it possible that the overall cost of owning and operating a car might not be changing that much?
Update: IRS guidelines allow 50.5 cents per mile deduction for vehicle expenses in 2008. At 12,000 miles per year, 25 mpg and $4 gasoline, that works out to about 16 cents per mile in fuel costs, leaving 34.5 cents for non-fuel related expenses. In percentage terms, that's 32% for gasoline and 68% for non-fuel expenses, including the cost of the vehicle, financing, depreciation, etc.