Cars affordability: Cheapest since 1980
Comerica Bank's 'Auto Affordability Index' shows average American works 23.6 weeks to buy a car.
NEW YORK (CNNMoney.com) -- It may not seem like it, but cars today are cheaper than they've been in the past 25 years.
According to Michigan-based Comerica Bank's "Auto Affordability Index," it now takes 23.6 weeks of America's median family income to afford a new car. That's 2.8 weeks less than it took at the end of 1995.
It's slightly longer than it took in 1980, the second year the index was computed, according to Comerica.
Including finance charges, the average passenger vehicle sold in the third quarter of 2006 cost $26,500. That's about five percent less than the same period a year before.
Meanwhile, the average family income has risen five percent over the same period, according to Comerica.
Improved productivity in the auto industry has combined with intense competitive pressures to drive the cost of a new car downward since its high in 1994, said Dana Johnson, chief economist at Comerica.
"It's a pretty happy story for the consumer," said Johnson.
Low promotional financing rates plus a shift by consumers toward more fuel-efficient models, which tend to cost less, also helped push down the average cost of a car in recent months, said Johnson.
For example, consumers might opt for a well-equipped Ford Fusion, a midsize car, instead of a well-appointed full-size Ford Five Hundred, Johnson said.
The Auto Affordability Index will probably not stay this low, said Johnson. Once auto retailers clear out their inventories of 2006 models, those super-low interest rate deals will probably dry up, he said.
Also, now that gas prices have leveled off, the demand for more fuel efficient models is easing. That means buyers will again turn to larger models which also tend to cost more.
Photos: Most reliable cars