Are cars getting more affordable?
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Cars are becoming increasingly affordable? It hardly seems possible given today's economy, but statistics show that a new vehicle purchase takes a smaller bite out of your wallet today than it has in years.
You can bet that huge incentives and subsidized leases have been a factor in bringing those costs down. Bloated inventories have forced automakers to do whatever it takes to sell vehicles that are sitting not only on dealer lots, but in storage yards around the country. These factors have helped the average cost of purchasing a vehicle today fall to an average of 23.6 weeks of income for a family making $58,000 a year. That's nearly three weeks fewer than five years ago and 7.3 weeks less than in late 1994. Average vehicle prices have dropped 5 percent over the last year to $26,500, while median family income rose about 5 percent.
Several dealers have had customers come in to buy a vehicle with paperwork from a vehicle purchase from the mid-80's and the price of the new vehicle is only a couple of thousand more, some with dramatically lower payments. While everyone seems to complain about how expensive things are today, it certainly doesn't seem to have affected what they drive.
[Source: Detroit News]
Reader Comments (Page 1 of 2)
doug 10:02AM (11/12/2006)
If I recall, the base price of a 1996 Taurus was $19,995. Compare that to a 2007 Fusion, base $17,995 - $1000 rebate.
My sister's 94 Civic cost $12,000 new. A 2007 costs about $16,000. thats less than 3% price increase each year.
Blame it on new manufacturing efficiencies, out sourcing, and the switch from cars to trucks as daily drivers for keeping car prices down. And the big 3's huge rebates.
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Joe 9:48AM (11/12/2006)
If income is going up, and the stock market is at an all-time high, what is so bad about our economy? this myth of a poor economy is perpetuated by people typing it because they hear it from so many sources that back it up with nothing, look at the numbers sometime and i think 'the economy' may impress you. Cars may be becoming more affordable, how about you leave your comments to cars, not econometrics...
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Gale 10:00AM (11/12/2006)
Sure, cars have become more affordable like blank compact disks have gotten cheaper.
Anytime you have companies that are willing to relegate their product to commodity status like the Big 1 3/4 have what you get is acres of unwanted vehicles sold at firesale prices. This will crash the used car market and tank the industry.
For those of you red, white and blue flag wavers, just take a look at the days supply for the Big 3, then consider that some plants are WORKING OVERTIME. No, they are not building super hot-selling vehicles either. They are bending to union pressure to pay big bucks before the golden goose dies.
Short of BMW and Porsche, the automobile has become the#10 envelope - a commodity that can be bought for nothing and thrown away... American style.
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bernie 10:06AM (11/12/2006)
Joe, Joe, Joe,
I'll bet you have a great way to blame last week's election on Clinton, too, but let's hold off on that until I have something on my stomach...
What is bad about our economy? #1 - real income IS NOT going up. #2 Real healthcare becomes out of reach for more Americans EVERY YEAR. #3 The upper 20% of income earners have done fine during the Bush years, but the bottom half feel worse off for it. And #4 Full employment means if an engineer making $90K gets laid off and takes a job at Home Depot making $35K everything is A-OK on paper.
Wake up!
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ramsport47 10:44AM (11/12/2006)
The economy in Cleveland SUCKS...I work for a yacht delaership and marina, and we are fighting tooth and nail to stay afloat in these Bush years. The owner, however, is a republican, and he thinks Bush is doing just great...we'll see if we are still in business when bush is finished scewing America
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apt34 11:41AM (11/12/2006)
wow, I still can't believe there are people who think the President has much to do with the state of the economy
The people of my country never cease to disappoint me, time and time again
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Richard S. 12:07PM (11/12/2006)
What about the effect of income taxes on the average wage? Sure, the average wage has gone up faster than inflation (and car price inflation) but the general tax bite (federal, state, local, Property Taxes) plus insurance (health, home, car) have gone up increasing the total burden for consumer as after tax and after expenditures leave less discretionary income in the hands of consumers.
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motorman 12:12PM (11/12/2006)
everybody in this country has "health care" just walk into a emergency room for free treatment. a lot do not have "health care insurance" but the ones that do are paying for the ones that do not. my wife was in the hospital from 8:00 AM one day till 11:00 AM the next and my insurance paid $55,000. this will cover the cost for a lot of people who do not have insurance. i am old enought to remember when you went to the doctor and you paid for it yourself but thanks to price and wage controls put in by the federal govt companies started to give health care insurance as a way around the contols to give wage increases. every action has a reaction and this is what happened there. as far a wages go times have changed and you will not make $50,000 to $100,000 a year working in on the factory floor like it has been in the past. you need a education in the right fields to make that kind of money now. if the stuff like DVD players,Ipods flat screen TVs we buy now were still made here in the USA most average workers could not afford it
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K 12:36PM (11/12/2006)
I bought a 1991 Honda Accord EX new for $15000. The list was somewhere above $17000 as I recall.
Sixteen years later the same EX top model lists for about $30000. But an LX can be had for under $20000. And it is a far better car than my 1991.
A closer comparision would be something like a Sonata four cylinder. It costs no more than the $15000 I spent in 1991.
Oh, the 1991 Honda still runs fine. It taught me that I could have a car and no longer care how they worked.
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Scott_D 12:41PM (11/12/2006)
how is everyone forgeting the one of most important factors in lowering the affordability of an automobile. The interest rate in the mid eighties was flirting with 10%, and there wasn't the huge incentives that there are today, those lower the monthly payments significantly. There was no zero percent financing back then.
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anahit 1:07PM (11/12/2006)
Any decrease in relative car prices is highly outweighed by significant vehicle improvements over time.
A car costing, say, 70% of the average wage in 1980 can't come close to a car costing 70% of the average wage today. It's worked that way for so many products. Hell, keeping wages constant or even decreasing them a fair amount would still mean consumers are better off for the vast majority of products like cars. The difference in bang-for-income-fraction-buck is simply not measured by looking at prices or wages.
The CPI and recent real wage blip don't accurately reflect the fact that what people receive for their income portion gets better and better all the time. Indeed, I'd argue that the real wage blip is precisely because we get more value for our money; specifically, global wage effects from other economies making our consumer goods at such low prices.
Economic life is always improving. People who think the old days were better are either old cranks or hopeless nostalgics. Either way, they're fools.
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AK 1:13PM (11/12/2006)
Motorman - that's not free, you still have to pay. They just can't turn you away because you can't. That's why D.C. General Hospital in Washington D.C. went bankrupt and closed down a couple of years ago - too many people were "taking advantage" of "free treatment."
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motorman 1:53PM (11/12/2006)
AK the problem was that there were not enought people with insurance using that hospital. they should have forced the congress to use that hospital with all their medical benefits it would be turning a profit. :D
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Barney 2:01PM (11/12/2006)
"a vehicle purchase from the mid-80's and the price of the new vehicle is only a couple of thousand more"
What's a few thousand? A replacement for a truck I bought in 1984 is more then double now and with more tax applied. The fuel to run it and insurance on it has gone up more then double. More couples HAVE to work just to keep up and now most need two vehicles because the transit system hasn't improved much since the 80s.
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iQuack 2:14PM (11/12/2006)
I think cars are getting both cheaper and better when you consider that today's cars have much more content than cars of the past.
Almost all cars sold today have standard air conditioning, power steering and brakes with ABS, longer-lasting radial tires, airbags, and more. They use less gasoline and are more reliable even though they're more complex.
In the '50s and 60s, cars were considered well worn when they reached 60,000 miles. Today's cars are expected to run twice that far before they're considered high mileage.
After adjusting for content, new cars cost less than those of 30 to 50 years ago. And new cars are MUCH safer, more reliable, and require far less maintenance.
Anyone longing for the "good old days" wants his/her youth back, not the crappy, old cars of the past.
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Bob_Ericson 4:08PM (11/12/2006)
> i am old enought to remember when you went to the doctor and you paid for it yourself but thanks to price and wage controls put in by the federal govt companies started to give health care insurance as a way around the contols to give wage increases.
Ding. Ding. Ding. Motorman is the winner. Health care is hurting to the extent "third parties" are involved. Look at the areas that are not covered by insurance. Plastic surgury, LASIK, Homeopathic, etc. These areas are booming and price is not come crass item beneath the vaunted medical professionals. It's an integral part of the process. LASIK prices have fallen by nearly a factor of 10 since it's introduction. You don't see them clamoring for a "Department of LASIK", do you?
Capatalism. Works everytime it's tried.
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James 2:32PM (11/12/2006)
I would have to say that I agree that the ownership burden of new cars has become cheaper. It used to be a car payment was 1/3 or 1/2 of my home payment, but now it's more like 1/7....even lower if I add in utility, insurance, gardener, etc. In the same time while the percentage of income has decresed fir ny cars, my car quality has increased greatly (from an entry level Domestic brand to a Luxury import).
The key here is the percentage of your income that goes towards the car, not the actual dollars. If you only made $25k a year and spent $500 a month on car payments, you would be better off today making $100k a year and spending $1500k a month car payment.
James
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pauln 2:35PM (11/12/2006)
Interesting timing: Just last night I calculated what I paid in todays dollars for new cars bought in 1984 and 1992 using a very convenient inflation calculator at www.westegg.com/inflation. The 1985 Cherokee I paid $16,000 for in 1984 would cost $30,000 today, and the 1992 Grand Caravan I paid $22,000 would be $30,000 today. I saw an ad for a new Grand Caravan yesterday for $17,000. Supply and demand have changed, and there is tremendous excess capacity. Cars are cheaper, generally.
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Woody 6:21PM (11/12/2006)
First the car issue: Our 2003 Accord SE sits on the used car lots (certified) for about the same we paid for it when it was 2 years old, I have not lost a cent on that car. It's ride and handling are phenominal, pickup with the 4 cyl is unbelievable. My 2006 Silverado is worth about a 1/3 less then when I paid for it and it has a ton of little problems that crop up. You get what you pay for, yes cost of American cars has come down.
As for the economy, I challange all of you questioning the current economy to come liver her in N.J. Run by the dems for years and years we have not experienced one bit of the flourishing economy. I make over 100k a year and still am at the point of diminishing returns. Our property taxes when we moved into the new development 8 years ago, 3550, now 8000 a year. The politicians love to spend our money and give NOTHING in return
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Andrew 4:22PM (11/12/2006)
The average car has a lot more stuff.
Power windows used to be a luxury - now most cars have them. Side airbags and more advanced airbags are becoming standard as is ABS. Leather seats much more common. Performance (acceleration, handling) are better.
Part of what I see is that people are buying more expensive vehicles because they can. Used to be standard family car was 4-door sedan then minivan - now often 5,600 lb SUV, a lot of these sticker in the mid-30k range.
My family has two cars. A toyota 2005 Sienna that we got for 23k (from what I've seen you could get same thing now for 21-22k with side airbags) and a 1999 Ford Contour - I got this for less than 11k (5-speed, crank windows, but it does have AC). If you want cheap cars you can find them.
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