November 15, 2006
Consumers are on average are paying $26,500 for a passenger vehicle or light truck including finance charges. Consumer are taking 23.6 weeks to earn the money to pay for the their new ride and that is five percent less than last year.
This means that new cars and light trucks are more affordable now than at any time since the early 1980s, according to Comerica Bank's most recent auto affordability index.
The Michigan-based bank reports consumers spend less time paying for a new vehicle in part because "improved productivity in the auto industry has combined with intense competitive pressures to drive down the cost of a new car."
Driving away in a new car required an average of 23.6 weeks of income for a family making $58,000 a year, the median in the third quarter of 2006. That's nearly three weeks fewer than five years ago and 7.3 weeks less than in late 1994.
"Rebates and cut-rate financing reduced the cost of buying a new car this past quarter," said Dana Johnson, Chief Economist at Comerica Bank. "With median family incomes still trending up at a healthy pace, light vehicles were more affordable last quarter than at anytime since 1980."
Johnson expects the affordability index to climb once auto retailers clear out their inventories of 2006 models and the low interest rate deals probably dry up.
As gas prices have leveled off, the demand for more fuel efficient models is declining suggesting buyers will again turn to larger models which also tend to cost more.
