Are new cars just getting more and more expensive?

The prices of new cars have risen in recent years – but are they more expensive now than before? With inflation, technological developments and changing market conditions in the equation, the answer is more complicated than it first seems. Karl Wahlin, analyst at Bilpriser, explains how it all fits together.

Today's modern cars are more advanced than ever. Safety systems, driver assistance, connected services, voice control and advanced information and entertainment systems are just a few examples of how cars have evolved in recent years. Thanks to technological developments, engines are becoming more powerful and fuel-efficient, while car models are growing in length and width – and are also becoming heavier.

The impact of inflation on car prices

Just like other goods and services, car prices are affected by inflation. When the general price level in society rises, production costs also increase – from raw materials and components to wages and logistics.

“Inflation is like a treadmill – if you don’t pick up the pace, you’ll fall behind. By adjusting older prices to today’s level, we see what a car would cost today if it had followed the general price trend. This helps us determine whether cars have actually become more expensive or whether the price increase just reflects that everything has become more expensive over time,” explains Karl Wahlin.

However, if we look at the price trend in today's monetary value, an interesting pattern is revealed. But we'll come back to that a little later!

Steady price development for the Volkswagen Golf

As an example, we have chosen to compare the price development for the Volkswagen Golf – one of the world's best-selling car models. Since its launch in 1974, over 35 million units have been manufactured, and the model alone accounts for one-forty percent of all cars in the world. In Sweden, there are approximately 215,000 registered Golf cars, spread across several models. In this comparison, we focus on the basic version for each generation, with a hatchback body and a gasoline engine.

– The Volkswagen Golf has changed a lot over time. For example, the body has gradually grown – from the Golf III to the Golf VIII, the length has increased by over 20 cm and the width by almost 10 cm. At the same time, the weight has risen from just over 1,100 kg in the 1990s to over 1,250 kg in today's model, says Karl Wahlin and continues:

– Although the new price in kronor has increased significantly, the inflation-adjusted price has remained at a consistent level through the generations. For example, the adjusted price for the Golf III was around SEK 235,000, while the Golf V and VI ended up between SEK 230,000–240,000. It is only with the Golf VII that a clearer increase is visible.

So, even though new car prices have increased, it turns out that the real price increase, when taking inflation into account, is not always as dramatic as it seems. It is a combination of technological advances and the general price increase in society that is reflected in car prices.