Consumers Hit by Higher Loan Costs, Comerica Bank Says
February 10, 2009
DALLAS -- The affordability of motor vehicles -- and the wallets of consumers buying them -- took a hit in the fourth quarter of 2008 from the sharp rise in the average interest rate on car loans, the Dallas-based Comerica Bank reported Tuesday.
"The underlying data show quite clearly that car buyers are facing stringent financing conditions," said Comerica's Chief Economist Dana Johnson. "In the latest quarter, car buyers had to put down bigger down payments, pay higher interest rates, and limit the maturity of their loans."
The total cost of buying an average-priced vehicle was $27,700 in the fourth quarter of 2008, up from $27,160 in the third quarter of 2008, the bank calculated.
As a result of the increase, the purchase of an average-priced new vehicle took 22.8 weeks of median family income in the fourth quarter of 2008, according to Comerica Bank's Auto Affordability Index. That's a half of a week more than the third quarter when it took 22.3 weeks to pay for a car but still down 1.3 weeks from a year ago.
Not only was the report bad news for consumers, the report contained bad news for automakers -- that people are buying cheaper cars.
"People in the market for new cars reacted to the difficult environment by choosing cars with lower sticker prices," said Johnson. "The average amount spent per car dropped 2.4 percent in the latest quarter."
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