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What can you afford these days? It’s not a set of wheels, because numbers released recently show that the average American family can’t afford a car.
New car prices have slowly begun to creep back up, and thus, are out of reach for some Americans. During the recession, the average family could have paid off a new car in as little as 22 weeks. Today, it takes 23.6 weeks of median household income to purchase a new car. But it’s better than in 1997, when the average was more than 30 weeks.
These stats are coming from Comerica Bank, which keeps track of auto affordability as an index. In the second quarter of 2010, the average price of a new car ($27,950) rose $200 from the same quarter a year ago. But there’s a silver lining in this dark cloud – the interest rate on the average car loan was 4.1 percent, down 0.2 percent from the previous quarter.
“Affordability was flat in the second quarter as rising expenditures on the new cars were offset by lower interest rates,” says Dana Johnson, chief economist for Comerica Bank. “Although the national recovery slowed in the second quarter, consumers were still willing to pay more for new vehicles.”
The slight increase in the cost of a car, lower interest rates and an increase in personal income has kept affordability mostly in check in 2010. During this current quarter, the average family income went up 2.4 percent while interest rates for car loans fell to a 4.1 percent average.
[Source: Kicking Tires]