Auto Affordability Improves

Auto Affordability Improves

The purchase of an average-priced new vehicle took 24.7 weeks of median family income in the first quarter, down 1.5 weeks from the fourth quarter of 2006 and down half a week compared to a year ago, according to the Auto Affordability Index compiled by Detroit’s Comerica Bank.

Including finance charges, the total cost of buying an average-priced light vehicle was $28,200 in the first quarter, up 1.6 percent from a year ago. Median family income increased an estimated 3.7 percent from a year ago.

“Consumers reacted to the sluggish economy, the rebound in gasoline prices, and the softness in home prices by spending about $550 less per car than they did in the fourth quarter,” said Dana Johnson, chief economist. “That along with the availability of more attractive financing rates reversed somewhat more than half of the last quarter’s deterioration in affordability.

"With demand soft and the new car companies fighting for market share, buyers were able to find pretty attractive deals on new cars in the first quarter,” Johnson added.

After dismal vehicle sales in April, consumer incentives have been proliferating, according to Edmunds AutoObserver.com’s analysis.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.