Auto Affordability: Paying Less, Extending Payments
By Michelle Krebs February 22, 2008By Michelle Krebs
DETROIT â Consumers who are buying cars are reacting to the difficult economic environment by spending less on a new car and extending their loan payments, according to a new study.
New-car buyers, whose ranks look to be the lowest this year of any since the turn of the century, are spending on average $300 less for their cars, according to the Auto Affordability Index compiled by Comerica Bank in Detroit, which overall showed vehicles more affordable than the last quarter or a year ago. In addition, they are extending the average term of a car loon by two months to 63 months.
The study showed the average-priced light vehicle was $28,715 in the fourth quarter.
At the same time, the study showed new vehicles are a bit more affordable than they were a year ago and the last quarter. They will continue to be more affordable in the early going of 2008, the study predicted.
“With the economy weak and interest (rates) declining, consumers are likely to find an even better deal on new cars over the first half of 2008,†the study concluded.
The Auto Affordability Index shows the purchase of an average-priced new vehicle took 24.4 weeks of median family income in the fourth quarter of 2007. That was down 0.5 weeks from the third quarter of 2007 and 1.8 weeks compared with the year-ago quarter.
Lower interest rates helped. So did an increase in median family income, which the study estimated at a 4.1 percent improvement from a year ago.
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