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With all the incentives, lease specials, and aggressive price reductions at dealerships—some desperate to stay open and keep the cars moving—it’s a good time to be a shopper.
The latest Auto Affordability Index figures from Comerica are reflecting that; the average-priced light vehicle in the first quarter of 2009 cost just $26,000, falling a full $1,700 versus the previous quarter and bucking a recent upward trend.
In Comerica’s terms, cars are the most affordable they’ve been since the company began compiling its quarterly index in 1979.
The more surprising story behind the numbers is that even when you consider falling incomes due to the economic conditions, cars are getting more affordable. Simply put, the overall cost of a car, financing included, fell faster than income.
The surge in affordability isn’t only due to the drop in interest rates from financial institutions; but thanks to the automakers themselves. Dana Johnson, Chief Economist at Comerica Bank, says that “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.”
It costs just 21.5 weeks of median family income to buy an average-priced new vehicle this year, versus 26 weeks as recently as late 2006 and 22.8 weeks for the fourth quarter of 2008.
In that previous quarter, cars had become less affordable, as median family income made its first decline since early 2002 and prices were up—all as auto sales continued to decline.