February 13, 2007
Vehicle affordability in America shows record deterioration
Detroit, Michigan – The purchase of an average- priced new vehicle took 26.2 weeks of median family income in the fourth quarter of 2006, according to the Auto Affordability Index compiled by Detroit-based Comerica Bank. That 2.2 rise in the number of weeks of work required to purchase a new vehicle was the biggest one-quarter deterioration in affordability ever recorded by the index. The sharp drop in affordability in the fourth quarter reversed most of the improvements in affordability recorded over the prior three quarters. Including finance charges, the total cost of buying an average-priced light vehicle was US$29,400 in the fourth quarter, up three percent from a year ago. Median family income rose about four percent over those same four quarters.
“The average amount spent on a new car jumped by more than $1,000 in the fourth quarter,” said Dana Johnson, Chief Economist at Comerica Bank. “With gasoline prices down sharply and wage and salary incomes showing healthy gains, consumers opened their wallets when shopping for cars and light trucks. 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.”