New car affordability best in years?

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Too late for the St. Paul Ford plant, but…

It’s been more than four years since the Great Recession officially began and the economy is still pretty lousy. But there are some signs that — if you have a job — your economic picture is starting to improve.

Today’s semi-bright spot comes courtesy of Comerica Bank, which reports that the “purchase and financing of an average-priced new vehicle took 23.1 weeks of median family income in the fourth quarter of 2011, the best affordability reading since the third quarter of 2009. Consumers on average spent $1,050 less (a decrease of 4.0 percent) on new cars in the fourth quarter.”

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Banks, of course, have a vested interest in people taking out loans to buy cars. Still, the data show evidence that job gains nationally are starting to push up incomes again.

“Household credit conditions are also improving, as shown by the low household financial obligations ratio, which measures total debt payments as a percentage of income,” Robert Dye, Chief Economist of Comerica Bank in Dallas, said in a prepared statement. “When you put those two concepts together, it means that households are increasingly willing to take on a reasonable amount of debt by purchasing an attractively priced automobile.”

The index isn’t very comforting if you don’t have a job or your income is declining. Still, there are signs Americans are working to make their financial lives manageable again.

University of Minnesota grad Mark Perry highlighted the Comerica data in his Carpe Diem blog today and noted that household financial obligations are at their lowest point since 1993.

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-Paul Tosto

  • http://linkert.name gml4

    The automobile market doesn’t make any sense right now. We bought a brand new car last summer… only because it was same price, or even cheaper than buying a used car!

  • Tim

    Yes, the flip side of this is that used cars are more expensive (and there are fewer of them) than they have been in a long time. I had a hard time finding something affordable when I was shopping for a used car last summer, particularly since I didn’t have much to spend — I couldn’t go above $2500. People are holding on to cars longer, for one thing (especially if they are fuel-efficient), but I also think that the Cash for Clunkers program removed a lot of the lower-end used car inventory that was out there.