Auto Affordability Improves Slightly

The purchase of an average-priced new vehicle took 24.4 weeks of median family income in the fourth quarter, according to the Auto Affordability Index compiled by Comerica Bank.

The latest reading is down 0.5 weeks from the third quarter and 1.8 weeks compared to a year ago. Including finance charges, the total cost of buying an average-priced light vehicle was $28,715 in the fourth quarter.

It is estimated that the median family income has increased 4.1 percent from a year ago.

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Consumers reacted to the difficult economic environment by spending about $300 less on average for a new car and by extending by 2 months the average term of a car loan to 63 months.

A 37 basis point reduction in the interest rate on car loans at finance companies also helped reduce the cost of owning a new car.

With the economy weak and interest declining, consumers are likely to find even better deals on new cars over the first half of 2008.

CP