New-Car Affordability At 25 Year High
The purchase of an average-priced new vehicle during the second quarter of 2004 took 20.6 weeks of median family income, before taxes, according to the Auto Affordability Index compiled by Comerica Bank released on Monday. This is 0.5 weeks more affordable than first quarter’s revised 21.1 weeks. Total cost, including financing charges, came to $27,126 in the second quarter, 0.8% down from first quarter 2004, and 1.5% above year-earlier levels. Median family income rose 1.6% from the first quarter, and is up 4.0% from a year ago. "Auto affordability reached a 25-year high in second quarter 2004 chiefly on strength of income and employment gains over the past 12-months," according to David L. Littmann, chief economist at Comerica Bank. Littman attributes the rise in affordability to low financing rates and incentives combined with a four percent increase in family incomes. Income has outpaced the annual increase in new car prices nearly twofold and overall vehicle transaction costs nearly threefold. Comerica's Auto Affordability Index is compiled from Commerce Department and Federal Reserve data. The index fully reflects Commerce’s data revision since 2001.
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