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Vehicle Affordability Up, Despite Finance Crunch, Lower Incomes

November 15, 2010
Despite rising costs of financing and falling household income, cars are more affordable than they were this past winter and spring.

That's what Comerica Bank found in its latest Auto Affordability Index, which looked at vehicle purchase price, household income indicators, and other factors for the third quarter of the year—July through September.

The average total cost (including financing) for a new vehicle went down $300, to $27,600. That 1.4-percent decrease in average price can be compared to a decrease in median family income of 0.2 percent during that period. The result: A weak increase in affordability.

Comerica, however, that people were buying less expensive vehicles during the period—which perhaps skewed the figures to indicate greater affordability. "With the recovery slowing and confidence shaky, consumers bought somewhat less expensive cars on average in the third quarter, thereby contributing to the improvement in affordability," said Dana Johnson, Chief Economist at Comerica Bank.

Also during the period, lenders started tightening the purse strings with slightly less desirable terms and a higher costs of financing—boosting the amount of an average vehicle loan by $200 and its length by a month. However, during October, even with automakers offering fewer incentives, auto sales proved to be one of the bright spots of the U.S. economy.

[Comerica Bank]

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