Are Cars Becoming Less Affordable for the Average American Family?

Money car
The short answer to that question is yes. New cars are becoming more unattainable for some Americans as the average transaction price involved with buying a new car has edged upward recently. This reverses a trend of cars becoming more affordable since 1997. 

The average cost of buying a new car has increased by $950 to $27,950 since the first business quarter of 2010, according to Comerica Bank, which regularly composes an auto affordability index. That’s a 3.3% increase. 

To put it another way, it now takes 23.6 weeks of median household income to purchase a new car, according to Comerica. That’s exactly the same amount of time it took to buy a car in the first quarter of 2010 and about a week and half more than last year when it took less than 22 weeks of income. 

Despite the nominal increase in the cost of a car, lower interest rates and an increase in personal income has kept affordability mostly in check in 2010. In the current quarter, the median family income went up 2.4% while interest rates for car loans fell to a 4.1% average. 

Overall, cars and financing are far more affordable today than they were 1997, when it took about 31.5 weeks of income to buy a car, or before the recession in 2006 when it took 27 weeks of income. 

New cars become slightly less affordable, index shows (USA Today)

By Colin Bird | August 11, 2010 | Comments (16)

Comments 

Kevin

This is silly. You can buy any decent enough used car for $15,000 or less if you look hard enough. You can find 3 year old Honda Odysseys for that amount. I bought a 2008 Civic LX (5 Speed) for $11,000, cash. Even considering all the government and market mandates of safety equipment, convenience (where can you buy a car without air conditioning or power locks, practically) the real problem isn't cars but people's attitudes regarding financing. Cash is king, remember that.

Tony

Well,

nobody is forced to by $27K car. People made it up themselves. They want leather, sunroof...

Dan

How much of this change is based on changing shopping habits, not by changes in car price?

In other words, if we look at a base model, mid-sized family sedan over the years, how much has that price changed? Then compare that to income growth. If the price of the car outpaced income growth, then yes, cars are becoming less affordable.

If we simply look at average purchase price, we aren't controlling for new car customers moving to more expensive vehicle choices.

No one buys a brand new car. Even a lot of wealthy people buy used cars, new cars depreciate right away anyways. You can easily buy a safe used car for under 10k, like a used Accord or Civic etc. No one needs to spend 27k on a car, you can actually find a good reliable used car for like $6k probably.

But if no one buys a new car...where do the used ones come from?

Amuro Ray

U r funny Billy4202...

To me, this article holds true. I remember that my dad was able to get an "almost" fully loaded Nissan Quest at around $20K (I think it was even under) back in 1993; I'm now looking for a minivan (not a 6 seater, so no Mazda or Kia), and you can't even get one under $22K (w/o cash back) as a barebone.

The subcompacts have gone up in price too! A Nissan Altima - mid-size class - used to start at $13K back in 1993; it has now grown in size and become pretty much a close-to-full-size, and starts at just a tad below $20K. The Nissan Versa (not the barebone 1.6) now sits in that territory - classified as a subcompact with the size of a close-to mid size, $13K. A subcompact back in the mid-90's cost 'bou $8K (Hyundai Pony and Accent).

Gone were those days...

Zack

Yea, I should be more like you, whiner.

It's hard to gauge affordability when there are plenty of different cars on offer.

yakuba

Billy4202 and Everyone!
You should not look at the Median (Middle) price but instead should look at the Mode (the most common) price!!
If 9 cars are sold at 20K and one car is sold at 100K then the Median price is 28K but in reality the most common car price sold is 20K!!

Alot of used cars come from rental places like Hertz and car donnations. I remember in the early 1990s (and before)alot of used cars were listed in the new paper by private owners. Buyers would go to their houses to check out the car. Nowadays, people sell their cars only to people they know or dealers or donnate it.
Anyway, 27K is alot of money to spend on an object that will become almost worthless in ~12 years!!!

Zerf

We got our midlevel new 08 Impala for $18K without trade, matching cash or any of that stuff. Has leather, remote start an lots of toys. Had lots of rebates and negotiated to invoice for that price. For that price we buy new. Seems like many spend on buying cars what will impress others or like Tony said on features they think they need. There are good prices out there for new cars you just have to be a little flexible and patient.

Tony

"No one buys a brand new car..."

This is why they sell millions of them

Tony

Here is what I noticed.
For the money I paid 12 years ago for Protege ES, today I can still buy a car like that. I will be Kia Forte and it will be even better equipped with better fuel economy. Question is, will it service me as good as Protege did?

George

Is Globalization, via outsourcing, offshoring, legal & illegal immigration designed to eliminate the middle-class of the United States?

I'd say yes. So the living standard of the average American family is declining, and automobile ownership is becoming more difficult.

Tony

George,

globalization, outsourcing and off-shoring not likely is designed to eliminate middle class. It is done to help corporations to make profits. And middle class is suffering as result. Now, the question here is, why do we need the government, which created favorable conditions for the few so that they can enrich themselves while others suffer? Because political campaign contributions? You remember what they say, "If you want to know where you go, look back in history". Watch for the rise of nationalism in this country. Hell, see how many people and states support Arizona immigration law. If the things will continue as they are, I don't think car prices will be the issue.

It's true that new and branded cars are not affordable to the average family and hence due to these reason average family members in America goes on used cars. But buying used is not an easy so take expert advice from global car experts.

Love those! I enjoy following your posts on facebook and rss!

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