Comerica Says Autos at their Most Affordable
by Steve Cypher on Tuesday, May 12th, 2009Latest Auto Affordability report from Comerica Bank shows new vehicles are at their most affordable level in 30 years.
New data
Here at Auto Credit Express, it seems as if we’ve never seen a buyers market for vehicles like the current one. Granted, rebates and incentives have been part of the new car market since 1975, when Lee Iacocca first introduced auto rebates to the American consumer. But, from what we can tell, the current cash offerings, along with both regular and subvented interest rates, sure appear to be some of the best ever. As it turns out, our hunch seems to be right on the money (no pun intended), as a recent report from Comerica Bank would seem to support our position .
Auto Affordability Index
Every quarter, since 1972, Comerica Bank has released a report it calls its “Auto Affordability Index.” The report compares the median family income in the U.S. to the purchase price of an average-priced new vehicle to determine how many weeks it would take to cover the cost of a new car and the results, according to a press release from the bank, are as follows:
The purchase of an average-priced new vehicle took only 21.5 weeks of median family income in the first quarter 2009. This reading is down 1.3 weeks from the prior quarter and is the lowest on record. Median family income continued to fall in the first quarter. However, the total vehicle cost of buying and financing a new car fell more sharply than income, reflecting sharply falling interest rates on car loans. The total cost of buying an average-priced light vehicle fell to $26,000 in the first quarter, down $1,700 from the prior quarter.
New car incentives
So despite the drop in the average income of an American family, a new vehicle is still more affordable now than it was in the fall of 2008. According to Comerica Bank’s chief economist, Dana Johnson, “”Part of the sharp decline in interest rates on car loans may have reflected some normalization of conditions in credit markets. However, with consumers sharply cutting back on their spending in the context of the severe recession, the car companies became much more aggressive in offering reduced financing rates as well as other types of discounts.”
The Bottom Line
So there you have it. Despite these challenging economic times, if you’ve been waiting on the sidelines for the right moment, that time, according to Comerica’s Auto Affordability Index, certainly seems to be now.
