Incentives and Prices for Motor Vehicles: What Has Been Happening in Recent Years?

Posted: 12 Jul 2021

See all articles by Carol A. Corrado

Carol A. Corrado

The Conference Board; Georgetown University - Center for Business and Public Policy

Wendy E. Dunn

Board of Governors of the Federal Reserve System

Maria Ward Otoo

Board of Governors of the Federal Reserve System

Date Written: 2006

Abstract

We address the construction of price indexes for consumer vehicles using data collected from a national sample of dealerships. The dataset contains highly disaggregate data on actual sales prices and quantities, along with information on customer cash rebates, financing terms, and much more. Using these data, we are able to capture the actual cash and financing incentives taken by consumers, and we demonstrate that their inclusion in measures of consumer vehicle prices is important. We also document other features of retail vehicle markets that interact and overlap with price measurement issues. In particular, we construct vehicle price indexes under different assumptions about what constitutes a \"new\" product in moving from one model year to the next. For the period that we study (1999 to 2003), a period during which incentives became more widespread and new model introductions rose, our preferred price index drops faster than the CPI for new vehicles.

Suggested Citation

Corrado, Carol A. and Dunn, Wendy E. and Ward Otoo, Maria, Incentives and Prices for Motor Vehicles: What Has Been Happening in Recent Years? (2006). FEDS Working Paper No. 2006-9, Available at SSRN: https://ssrn.com/abstract=3883776

Carol A. Corrado (Contact Author)

The Conference Board ( email )

845 Third Avenue
New York, NY 10022
United States
202-340-0252 (Phone)

Georgetown University - Center for Business and Public Policy ( email )

Washington, DC 20057
United States

HOME PAGE: http://cbpp.georgetown.edu

Wendy E. Dunn

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Maria Ward Otoo

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2236 (Phone)
202-452-5296 (Fax)

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