Which of the following are given in the textbook as good sources for fair pricing on used cars?

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 cars and trucks index is published monthly at the U.S., regional, and area level.

Item definition

The used cars and trucks index is comprised of used vehicles that are between 2 and 7 years of age. Subcompact, compact or sporty, intermediate, full, and luxury cars are all included in the index. Light trucks in the index include pickup trucks, vans, and specialty vehicles like sport/cross utility vehicles.

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.

Relative Importance

The relative importance of an item category is its percent of the CPI weight as of December of the most recent year.

Sample selection

The CPI’s current used cars and trucks sample is calculated using data from the J. D. Power Information Network (JDPIN), a network of car dealers who report sales of used vehicles to the J. D. Power Company. A sample of 480 two to seven year old vehicles is selected from the JDPIN based on probability proportionate to sales. This national sample of 480 observations is proportionally allocated using 2010 Census CPI stratum populations to each of the ten J.D. Power Valuation Services NADA values regions. The ten largest CPI sample areas within each region are assigned as “Parent” regions. Prices are then replicated in all other “Children” CPI areas within each region with appropriate weight adjustments. Taxes are then applied to each observation based on their assigned tax jurisdiction within each individual CPI sample area. The Washington CPI office collects prices on this sample on a monthly basis, using J.D. Power Valuation Services’ NADA values.

The sample is updated by one model year each September so that each vehicle in the sample maintains the same age over time. If a production model is discontinued, it is replaced by a comparable model. This process of refreshing the sample is called “model changeover”. Periodic resampling is scheduled as resources allow.

Price Change and Quality Adjustment

The CPI does not collect price information on used cars and trucks ourselves; all price information for used cars and trucks used in the CPI comes from JDPIN. All prices are adjusted for depreciation of the vehicle.

Price Change

The CPI gathers data on the first of each month from JDPIN. The valuations obtained on the first of each month are compared against the valuations obtained on the first of the previous month. Before a price relative is calculated by directly comparing prices from the current a previous period, adjustments are made for depreciation and mileage on prices for both time periods.

The CPI adjusts each used vehicle quote for depreciation to account for the reduced value  that accrues throughout the duration of a year. The CPI has developed a formula that calculates a depreciation adjustment for each observation in the sample. The calculation uses a price ratio between the sampled car (vintage v) and its one model year younger counterpart (vintage v+1) to determine an adjustment

The CPI also adjusts each used vehicle quote for mileage so that every quote in the index more accurately represents the mileage of used vehicles in the market. Each used vehicle quote in the CPI is assigned a mileage amount during model changeover, and this mileage assignment remains unchanged throughout the year. For example, vehicle X may be assigned a mileage of 70,000 during model changeover which accurately reflects the mean mileage of transactions for that make/model/trim during that month. 11 months later, just before the next model changeover, the mean mileage of transactions for that make/model/trim has increased to 80,000. Since the quoted vehicle’s assigned mileage is now lower than the mean mileage of transactions in the market, a positive mileage adjustment is made on price. If the CPI made no adjustments and simply used the average mileage observed in the market for each quote, the price of each quoted vehicle would drop as the year progressed since average mileage observed in the market increases at the make/model/trim/model year level on a month-to-month basis.

Quality adjustment

Quality adjustments are made in the CPI for new and used vehicles based on manufacturers’ costs obtained by our 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.

Data

Access data for used cars and trucks in our online database.

Additional information

Although the CPI uses the J.D. Power Valuation Services values to obtain prices, other sources are available. The two most commonly used sources are the Kelley Blue Book and the Black Book. Mention of external data sources should not be considered as an endorsement by BLS.

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 wholesale auto auctions that are only open to professional buyers. Manheim runs a chain of these auctions and has thousands of vehicles to use as source data. Note that they do not do adjustments for depreciation or quality changes and its index comes out monthly.

Adesa Auto Auctions is another chain of auto auctions; they have various data available on used car pricing trends, but do not produce a specific price index.

Automotive News is a trade publication covering the Automobile industry that sometimes has information on used car and truck pricing trends.

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 BLS Handbook of Methods.

Last Modified Date: June 15, 2022