Not only has buying a new car become more affordable, but the cost to finance the car also is more affordable, according to Comerica Bank’s Auto Affordability Index.
The purchase of an average-priced new vehicle took only 21.5 weeks of median family income in the first quarter 2009. This time data is down 1.3 weeks from the prior quarter and is the lowest on record. Also, median family income continued to fall in the first quarter.
Comerica Bank found that the total vehicle cost of buying and financing a new car fell more sharply than income, reflecting sharply falling interest rates on car loans. The total cost of buying an average-priced light vehicle fell to $26,000 in the first quarter, down $1,700 from the prior quarter.
The cost of new cars is down, as well as the cost to take out a car loan to buy it.
“Part of the sharp decline in interest rates on car loans may have reflected some normalization of conditions in credit markets,” said Dana Johnson, chief economist at Comerica Bank. “However, with consumers sharply cutting back on their spending in the context of the severe recession, the car companies became much more aggressive in offering reduced financing rates as well as other types of discounts.”
With the combination of affordable automotive financing and big discounts on new cars, if you’re in the market for a new car, this is a good time to save money on a vehicle purchase.