A 2.2-week rise in the number of weeks of work required to purchase a new vehicle in the US was the biggest one-quarter deterioration in affordability ever recorded by the auto affordability index compiled by Detroit-based Comerica Bank, which said the purchase of an average-priced new vehicle took 26.2 weeks of median family income in the fourth quarter.
“The sharp drop in affordability in the fourth quarter reversed most of the improvements in affordability recorded over the prior three quarters,” the bank said.
Including finance charges, the total cost of buying an average-priced light vehicle was $US29,400 in the fourth quarter, up 3% from a year ago. Median family income rose about 4% over those same four quarters.
“The average amount spent on a new car jumped by more than $1,000 in the fourth quarter,” said Comerica Bank chief economist Dana Johnson.
“With petrol prices down sharply and wage and salary incomes showing healthy gains, consumers opened their wallets when shopping for cars and light trucks. That along with a rebound in financing costs reflecting less generous incentive programmes resulted in a sharp deterioration in our affordability index in the fourth quarter.”