New-Car Prices & Income Don’t Match Up
Car prices are on the way up, but there’s one problem. Income isn’t following the same path.
Requisite Press LLC — after releasing its new Auto Buyer’s Affordability Index (ABAI) earlier this summer — recently reported car prices have outpaced incomes since the recession.
The July 2014 ABAI reading of 53.5 indicates that median-income family can only afford 53.5 percent of an average new-car price.
The bottom line, new-car prices have increased at more than twice the rate of incomes during the span of 2009-2013.
The average new-car price grew by 8.9 percent, whereas median household income increased by only 4 percent during that time period, according to data from the U.S. Bureau of Economic Analysis and the Census Bureau.
That said, though new-car prices remain high, strength in new sales is actually serving to push used prices down.
Analysts at ALG and RVI both cited new-car sales as a factor that will lower used prices in the coming years.
According to ALG, this trend has reappeared for the first time since 2008.
ALG analysts say a “wave” of newer vehicles from trade-ins has started to flood the secondhand market and will gradually bring resale values back down to pre-recession levels. For more analysis on this trend, see the Auto Remarketing story here.
Although the new-car market may be booming and used prices may become more attractive to shoppers in the near future, It is clear average income will still need a boost for a new-car purchase to be a viable option for some shoppers.