How BLS Measures Price Change for Leased Cars and Trucks in the Consumer Price Index
The Leased Cars and Trucks index became part of the Consumer Price Index (CPI) market
basket during the 1998 CPI revision. Publication of the Leased cars and trucks index for
the urban United States on a monthly basis began in January 2002. Price indexes for
smaller geographic areas are not published because sample sizes are not sufficient. As
of February 2010, the Leased Cars and Trucks index had a sample of 276 observations.
The Leased Cars and Trucks index is a component of the New and Used Motor Vehicles
expenditure class, which is part of the CPI's Private Transportation component in the Transportation
major group. Table 1 contains the item strata that comprise the New
and Used Motor Vehicle index, together with their December 2011 relative importances
(their shares of the weight of the U.S. city average of the CPI for All Urban Consumers
(CPI-U):
Table 1: Relative Importance of Selected Transportation components of the CPI for All
Urban Consumers (CPI-U): U.S. city average, December 2011 (2009-2010 weights)
Item |
Relative importance All Items(percent) |
Relative importance New and Used Motor Vehicles (percent) |
All Items |
100.000 |
|
Transportation |
16.543 |
- |
Private Transportation |
15.385 |
- |
New and used motor vehicles |
5.540 |
100.000 |
New vehicles |
3.132 |
56.534 |
Used cars and trucks |
1.876 |
33.863 |
Leased cars and trucks |
.395 |
7.130 |
Car and truck rental |
.069 |
1.245 |
Unsampled new and used motor vehicles |
.068 |
1.227 |
The weight of leased cars and trucks in the Consumer Price Index consists of consumer
spending on leased cars and trucks. The index covers leases on all classes of new
consumer vehicles, including; subcompact cars, compact or sporty cars, intermediate
cars, full sized cars, luxury or status cars, pickup trucks, vans, and specialty
vehicles, including sport/cross utility vehicles.
Selection of Retail Outlets and Items
The selection of retail outlets, where the CPI gathers prices for the Leased Cars and
Trucks index, is based on information from the Telephone-Point-of-Purchase Survey (TPOPS).
On the initial visit to a retail outlet, CPI data collectors use a disaggregation
process to select the sample of vehicle leases whose prices they will follow over time
for the index. The disaggregation process is a probability sampling method that uses the
proportion to dollar volume of sales to select from among all leases the retail outlet
offers to consumers for new vehicles; leases for used vehicles are not eligible. The CPI
data collector describes each selected vehicle lease in detail including the vehicle
make, nameplate, model, engine, transmission, options, and lease terms. The lease terms
include items such as the number of months of the lease term, the down payment, the
residual value, the depreciation amount and the total rent charge.
Estimated Transaction Price and Price Adjustments
The value that the CPI uses in the Leased Cars and Trucks index is an estimated
transaction price that reflects the vehicle base price, destination charge, options,
dealer preparation charges, applicable taxes, depreciation, and lease rent charge (the
finance fee portion of a monthly lease payment, similar to interest on a loan). The
estimated transaction price also includes the respondent's estimate for the price markup,
dealer concession or discount, and consumer rebate. The basic formula used to calculate
the total monthly lease payment used in calculating the Leased Cars and Trucks index:
Base Price of Leased Vehicle
- + Transportation to Dealer
- + Total Price of Packages & Options
- + Dealer Prep and Misc. Charges
- + Additional Dealer Markup
- - Dealer Concession or Discount
- = Capitalized Cost (similar to the purchase price of a vehicle)
- - Downpayment (cash paid up front by the customer)
- - Rebate
- - Other Capitalized Cost Reductions
- + Tax (if included in Capitalized Cost)
- + Other Additions to Capitalized Cost
- = Adjusted Capitalized Cost (amount used to calculate base monthly payment)
- - Residual Value (value of the vehicle at the end of the lease)
- = Depreciation Amount (the total amount charged for the decline in value)
- + Total Lease Rent Charge (the finance fee, similar to interest)
- = Total of Base Monthly Payments/ Lease Term (the number of months in the lease)
- = Base Monthly Payment
- + Monthly Sales/Use Tax
- = TOTAL MONTHLY LEASE PAYMENT
Model Year Change-Over and Quality Adjustments
Each year, the CPI performs a model year change-over procedure for all vehicle
indexes. For the Leased Cars and Trucks index, the CPI replaces the old model with the
new one when 50 percent or more of the leases written during the previous 30 days, for
the nameplate being priced, are for the new model year vehicle. While new models may be
introduced anytime during the year; they are most often introduced in the fall and are
generally reflected in the CPI in September through February.
The Leased Cars and Trucks index uses the same quality adjustment values to adjust
for any quality changes between the new model year and the old model year vehicle used
in the CPI New vehicles index. These values are based on costs provided by vehicle
manufacturers for categories such as: reliability, durability, safety, fuel economy,
maneuverability, speed, acceleration/deceleration, carrying capacity, and comfort or
convenience. The CPI also makes adjustments when equipment is added or deleted from
the tracked model, but does not make adjustments for changes in mandated pollution
controls. (1)
For additional details please see "Guidelines for Quality Adjustment of New Vehicle
Prices" available on the BLS Internet site at www.bls.gov/cpi/cpiautoqaguide.pdf.
Reports on Quality Changes
The Producer Price Index program publishes an annual report on the quality changes to
new models. The report provides the average model year changes in invoice price and a
retail equivalent price, as well as the estimated value of quality changes. These press
releases are available at /ppi/motor vehicles.htm.
Other sources of information on leased cars and trucks:
- The Federal Reserve Board
- Leaseguide.com
- Association of Consumer Vehicle Lessors
- Ward's Automotive
- Eddmunds.com
- Kelly Blue Book
Footnotes
(1) CPI Detailed Report, "Treatment of Mandated Pollution Control Measures
in the CPI," (September 1998).
Additional information
Additional information on the Consumer Price Index
can be found in the BLS Handbook of Methods, chapter 17,
"The Consumer Price Index," Bulletin 2490 (1997).
The current version of this chapter is also available on the BLS Internet site
www.bls.gov/opub/hom/homch17_a.htm or you
may call the Information and Analysis Section of the CPI
at 202-691-7000.
Last Modified Date: February 23, 2012