Are Cars Becoming Less Affordable for the Average American Family?
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.