For twenty-three years — from 1997 to 2020 — the CPI index for new vehicles barely moved. It went from 144.6 to 147.9, a total increase of just 2.3%. During the same period, overall CPI rose 58%. Buying a new car was, in inflation-adjusted terms, getting cheaper every year. Then came the semiconductor shortage.
Transportation is the second-largest spending category for American households, behind only housing. And within transportation, the costs diverge in ways that are almost comically extreme. New car prices barely moved for a generation. Used cars delivered the most violent short-term price spike of the entire COVID era. Auto insurance has been climbing relentlessly for four decades, accelerating into a full sprint since 2020. And airline fares gyrate so wildly from year to year that they make egg prices look stable.
The Consumer Price Index tracks all of these categories separately, and the data — stretching back to 1953 for new vehicles — tells four very different stories about what it costs to get from one place to another in America. In two years, new vehicle prices surged 21%. Used cars surged 55%. And auto insurance, already climbing relentlessly, exploded to become the fastest-rising cost in American transportation.
The CPI index for new vehicles is one of the most counterintuitive series in American economic data. From 1953 to the mid-1990s, new car prices rose roughly in line with overall inflation — the index climbed from 46.3 to about 145, tracking the broader economy. Then something remarkable happened: the index flatlined.
From 1997 to 2020, the new vehicle CPI index went from 144.6 to 147.9 — a total increase of 2.3% over twenty-three years. During that same period, overall CPI rose from 159.4 to 259.1, a gain of 63%. In real terms, new cars were getting cheaper every single year for nearly a quarter century.
The explanation lies in hedonic quality adjustment — the BLS methodology that accounts for improvements in what you actually get for your money. A $35,000 car in 2020 came with backup cameras, lane-departure warning, Bluetooth connectivity, and ten airbags. A $15,000 car in 2000 had manual windows and a cassette deck. The BLS treats those quality improvements as implicit price reductions, and the math works out to near-zero inflation on the sticker price.
Then came the semiconductor shortage of 2021. Global chip production, concentrated in a handful of Asian foundries, could not keep up with demand as economies reopened. New car production fell roughly 25%. Dealers — for the first time in modern memory — began charging above MSRP. Discounts vanished. The new vehicle index jumped from 147.9 in January 2020 to 179.2 by January 2026 — a 21% increase in six years, after 23 years of near-zero movement. The plateau was over.
If new car prices delivered a slow surprise, used cars delivered a fast one — the most dramatic two-year price spike in any major CPI category during the COVID era.
In January 2020, the used cars and trucks CPI index stood at 139.4 — actually lower than it had been in 1995, when it hit 152.4. Used cars were one of the rare CPI categories that had gotten cheaper in nominal terms over a quarter century. Depreciation curves, expanding supply from off-lease vehicles, and a growing used-car dealer infrastructure had kept prices contained.
Then two things happened simultaneously. First, the semiconductor shortage throttled new car production, pushing millions of would-be new-car buyers into the used market. Second, rental car companies — which had sold off enormous portions of their fleets during the 2020 lockdowns to survive — rushed back into the used market to restock, competing with ordinary consumers for a shrinking pool of vehicles.
The result was an index that went from 139.4 to 215.5 in exactly two years — a 55% surge. That is the largest two-year increase for any major CPI component during the pandemic. Not lumber. Not eggs. Used cars. By January 2022, a three-year-old Honda Civic that had sold for $18,000 in 2019 was fetching $26,000 or more at auction.
The correction, when it came, was swift but incomplete. As chip supply recovered and new car production normalized, the used car index fell back to 181.3 by January 2026 — still 30% above pre-COVID levels. The spike evaporated, but the new price floor did not.
If new cars tell a story of surprising stability and used cars tell a story of sudden shock, auto insurance tells the most unsettling story of all: relentless, accelerating, seemingly unstoppable cost inflation that has been building for four decades.
The motor vehicle insurance CPI index stood at 113.5 in 1985. By January 2026, it had reached 893.4 — an increase of 687%. No other transportation category comes close. For context, overall CPI rose about 195% over the same period. Auto insurance outpaced general inflation by a factor of 3.5.
The recent acceleration is particularly alarming. From 2020 to 2026, auto insurance surged 56% — roughly 8% per year. The drivers are structural, not cyclical. Modern cars are packed with sensors, cameras, and advanced driver-assistance systems (ADAS) that cost thousands to repair after even minor collisions. A cracked bumper on a 2010 sedan was a $500 fix. A cracked bumper on a 2024 SUV with radar sensors and parking cameras can run $3,000 to $5,000. Rising medical costs inflate injury claims. “Nuclear verdicts” — jury awards exceeding $10 million in auto accident cases — have surged in frequency, pushing liability costs higher. And more frequent severe weather events mean more comprehensive claims for hail, flood, and storm damage.
The result is that while the car in your driveway may not cost much more than it did in 2000, insuring it costs roughly three times as much.
Airline fares occupy a category all their own in the CPI — the most cyclical, most volatile, and most unpredictable of all transportation costs. The index surges during oil shocks, collapses during recessions, and swings 20% or more in a single year with a regularity that would terrify anyone watching a stock chart.
The COVID collapse was the most dramatic example. The airline fare index dropped from 268.7 in January 2020 to 211.2 in January 2021 — a 21% decline in a single year as travel demand evaporated and carriers slashed fares to fill empty planes. The recovery was uneven: prices rebounded to 277.7 by 2023, then fell back again. As of January 2026, the airline fare index stands at 279.7 — still below the 2015 peak of 295.3.
The structural dynamics of the airline industry explain the volatility. Fuel costs represent roughly 25% to 35% of an airline’s operating expenses, and jet fuel tracks crude oil — itself one of the most volatile commodities on earth. Airlines practice aggressive capacity management, adding and cutting routes based on demand forecasts that shift quarterly. And intense competition, particularly from low-cost carriers, creates constant downward pressure on fares even as costs rise. The result is a category where the year-to-year CPI movement can be almost random, even as the long-term trend inches upward.
The table below ranks each major transportation cost category by total percentage increase over its available history. The range is extraordinary: auto insurance leads at +687%, while new vehicles trail at +110%. The category that consumers obsess over — the sticker price of a new car — has actually been one of the best-behaved prices in the American economy. The category that nobody watches — insurance — has been one of the worst.
| Category | Period | Start | 2026 | Change | Annual |
|---|---|---|---|---|---|
| Motor vehicle insurance | 1985–2026 | 113.5 | 893.4 | +687% | 5.2% |
| All Items CPI | 1980–2026 | 78.0 | 326.6 | +319% | 3.1% |
| Used cars & trucks | 1980–2026 | 59.1 | 181.3 | +207% | 2.4% |
| Airline fares | 1989–2026 | 128.0 | 279.7 | +118% | 2.1% |
| New vehicles | 1980–2026 | 85.2 | 179.2 | +110% | 1.6% |
Transportation costs tell three different stories. New cars barely inflated for a generation — one of the CPI’s quiet success stories — then surged during the semiconductor crisis and haven’t fully retreated. Used cars delivered the most violent short-term price spike of the entire COVID era — a 55% surge that evaporated almost as quickly. And auto insurance, the category nobody watches, has been the relentless climber — up 687% since 1985 and accelerating.
The car in your driveway may not cost much more than it did in 2000. Insuring it costs three times as much. The sticker price was never the real story. The carrying cost was.
In the next episode, we step back and look at the entire CPI at once — the grand divergence between goods and services that defines the American economy.