Consumers looking for a new car may not need to take their wallets to the hospital afterwards should prices continue to fall and incomes continue to rise.
According to Edmunds , the Auto Buyer’s Affordability Index found that a consumer whose income matched the U.S. household median of $54,457 could afford 54.1 percent — $16,448 — of a new vehicle with an average transaction price of $30,382, as recorded in October 2014.
ABAI publisher Requisite Press stated that while the current percentage was still high, “transaction prices have recently begun to weaken under ideal conditions for strength,” such as the rise in income among consumers. There, the ABAI found said income had climbed 3.8 percent above the 52.1 percent value reported in April of this year, corresponding to an extra $653 in spending ability.
The publisher adds that should the center hold, the U.S. median household income would continue to outpace automotive pricing, a status not seen since 1980. President Phil Kelton explains:
New-car affordability is likely to improve in the coming days if we can avoid an income slowdown. The selection of affordable models is best increased by competition, but a sustained improvement in affordability will certainly give it a boost.
As for taking advantage of this burgeoning reality, Requisite Press suggests consumers “maximize their buying power” along every step of the car-buying process, with a suggestion to follow the 20-4-10 rule: 20 percent down, four-year loan term max, 10 percent of income spent on car payments.
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