Comerica: Auto Affordability Hits Nine-Quarter Low
DALLAS — Increased interest rates were the primary factor in pushing first-quarter auto affordability down to a more than two-year low, according to Comerica Bank, which released its most recent Auto Affordability Index today.
Specifically, it required 23.4 weeks of median family income to buy and finance an average-priced new vehicle, compared with 23.1 weeks, the revised level in the previous quarter.
"Affordability deteriorated slightly in the first quarter, mostly due to the rise in interest rates on car loans," explained Dana Johnson, chief economist at Comerica Bank.
"With the ongoing improvement in the economy, consumers were willing to pay a bit more for new vehicles, allowing the car companies to offer less generous discounts and financing terms," Johnson added. "The result is that auto affordability in the first quarter was the lowest in nine quarters."
On average, it cost $27,500 to purchase and finance a new vehicle, a $500 hike from the fourth quarter. Comerica said the first-quarter cost marked "an 8 percent annual rate increase from the previous quarter."
Meanwhile, officials approximated that during the first quarter, median family income climbed at about a 2-percent annual rate.
There was a 50-basis-point rise in average car loan rates to 4.3 percent in the first quarter, which compares to 3.8 percent for 2009.