A study by Comerica Bank shows that the average purchase price of a new vehicle went up $300 in the second quarter versus the Q1, bringing the average transaction price to $26,300. The upward swing in prices came at a time when the average household income remained stagnant. The average family needs 22.1 weeks of median family income to pay for their new vehicle purchase, up .3 weeks from Q1. According to the study, higher transaction prices were slightly offset by lower financing rates, down to a very low average of 3.45%; the lowest rate in five years.
Comerica says that the reason the average purchase price rose in Q2 is that customers were buying more expensive cars. That's a bit odd in such a down economy, although lower overall sales could mean that customers who would normally purchase lower priced vehicles stayed out of dealerships altogether. The lower interest rates and higher transaction rates tells us that automakers are likely offering more 0% financing offers, which typically replaces heavy rebates in return for a lower monthly payment. Comerica Chief Economist Dana Johnson feels the average vehicle transaction price will ultimately come back down in Q3, due in part to the success of Cash for Clunkers. Hit the jump to read over the official press release.
[Source: Comerica Bank | Image: Karen Bleier/AFP/Getty]
DALLAS, Aug. 17 /PRNewswire-FirstCall/ -- The purchase of an average-priced new vehicle took 22.1 weeks of median family income in the second quarter 2009, according to Comerica Bank's Auto Affordability Index. This reading is up 0.3 of a week, thereby representing a slight deterioration in affordability compared to the prior quarter. Median family income was essentially unchanged in the second quarter. The total cost of buying and financing a new car rose, however, due entirely to the fact that consumers chose to buy more expensive cars on average. The average price of a light vehicle purchased in the second quarter rose by $300 to $26,300.
"While consumers opted to buy more expensive vehicles last quarter, a sharp drop in financing costs held down our affordability index," said Dana Johnson, Chief Economist at Comerica Bank. "Reflecting the partial normalization of credit markets, the average rate paid on a car loan at finance companies was only 3.45 percent last quarter, the lowest level seen in five years. In the current quarter, our affordability index very possibly will reach a new best reflecting the cash-for-clunkers program that is now in place."
This report incorporates the latest data on consumer spending on light vehicles and on the terms available on auto loans. The full history of the Index is available upon request.
Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three business segments: The Business Bank, The Retail Bank, and Wealth & Institutional Management. Comerica focuses on relationships, and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico. Comerica reported total assets of $63.6 billion as of June 30, 2009. To receive e-mail alerts of breaking Comerica news, go to http://www.comerica.com/newsalerts.