Cars have gotten much more affordable over the past 100 years

Electric car (Image: YouTube screen grab)

A century ago, a Ford Model T cost $260. Today, a Nissan Versa costs $16,290. While that sounds much more expensive, it’s only because a dollar has lost most of its value. A dollar in 1924 is worth $17.59 today. If dollars were worth the same, a Nissan Versa would cost only $926, only 3.5 times as much as a Model T. And in reality, a Nissan Versa is cheaper, because it is more durable, requires much less maintenance, and is much faster and safer. In the mid twenties new cars’ “life was short – 5 to 7 years, and well under 100,000 miles with a motor overhaul required every 20,000 or 30,000 miles.” And a crash would inevitably lead to death at speeds commonly traveled today.

More importantly, the average person is vastly richer today than in the 1920s, so they can buy a car with a much smaller fraction of their earnings:

While the Versa is more expensive, it is also much more affordable. Why? Because hourly wages have increased faster than prices. In 1924, blue-collar hourly compensation (wages and benefits) was about 51 cents an hour. The time price of a new Model T was about 510 hours. Blue-collar workers today are earning closer to $36.50 an hour. This puts the Versa time price at 446 hours. You save 64 hours. The time price of a new car has declined by 12.5 percent. For the time it took to earn the money to buy one Model T in 1924, you get 1.14 Versas today.

But this is only a small part of the story. Cars today are faster, safer, and more comfortable, powerful, and reliable than ever. Creative entrepreneurs and free markets give consumers great choices and prices.

The Model T was a great innovation in its day. From 1908 to 1924, the price fell from $850 to $260 as Henry Ford and his team moved up the learning curve with massive volumes.

By the way, it’s a myth that Henry Ford increased the wages of his workers to that they could afford to buy his cars. That’s not why he increased their wages. Instead, notes Forbes, the reason he raised their wages was to reduce

the turnover of his staff.

At the time, workers could count on about $2.25 per day, for which they worked nine-hour shifts. It was pretty good money in those days, but the toll was too much for many to bear. Ford’s turnover rate was very high. In 1913, Ford hired more than 52,000 men to keep a workforce of only 14,000. New workers required a costly break-in period, making matters worse for the company. Also, some men simply walked away from the line to quit and look for a job elsewhere. Then the line stopped and production of cars halted. The increased cost and delayed production kept Ford from selling his cars at the low price he wanted. Drastic measures were necessary if he was to keep up this production.

That level of turnover is hugely expensive: not just the downtime of the production line but obviously also the training costs: even the search costs to find them. It can indeed be cheaper to pay workers more but to reduce the turnover of them and those associated training costs. Which is exactly what Ford did.