The Manchester Enterprise
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Vehicle affordability is down
Average amount spent on a new car jumped by more than $1,000
By Joseph Szczesny, Journal Register News Service
PUBLISHED: May 10, 2007
Consumers are paying more for new cars.
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A survey by Comerica Bank indicates that in the fourth quarter, buyers used 26.2 weeks of median income to cover the price of the average new vehicle.
That 2.2 week rise in the number of weeks of work required to buy a new vehicle was the biggest one-quarter deterioration in affordability ever recorded by the index, according to the bank's quarterly report on affordability.
The report is closely watched across the industry because it is one indicator of future vehicle demand.
The sharp drop in affordability in the fourth quarter reversed most of the improvements recorded over the prior three quarters, said Dana Johnson, Comerica Bank chief economist.
"The average amount spent on a new car jumped by more than $1,000 in the fourth quarter," said Johnson, adding that higher interest rates and smaller incentives from manufacturers contributed to the increase.
"With gasoline prices down sharply and wage and salary incomes showing healthy gains, consumers opened their wallets when shopping for cars and light trucks," Johnson said. "That along with a rebound in financing costs reflecting less generous incentive programs resulted in a sharp deterioration in our affordability index in the fourth quarter."
The cost, including finance charges, was $29,400 in the fourth quarter, a rise of 3 percent from a year ago. Median family income rose 4 percent in those four quarters.
The Comerica report tracks consumer spending on light vehicles and on the terms available on auto loans.
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