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Auto Affordability Best in 18 Years - Comerica Index

16 February 1999

Auto Affordability Best in 18 Years - Comerica Index

    DETROIT, Feb. 16 -- The purchase of an average-priced new
vehicle in 1998 required 24.6 weeks of median family income, before taxes,
according to the Auto Affordability Index compiled by Detroit-based Comerica
Bank.  This compares to the 25.5 weeks of income required for the purchase in
1997 and 27.2 weeks in 1996.
    "Last year, vehicles were at their most affordable level since 1980, when
new vehicle purchases absorbed an average 23.5 weeks of income," said David L.
Littmann, chief economist with Comerica Bank.  "Many favorable factors came
into conjunction during 1998 to improve auto affordability and contribute to
higher vehicle sales.  Foremost was income growth of 5 percent, compared with
a 2.1 percent increase in outlays on vehicles," he said.
    "Throughout the year, new vehicle prices were below year-earlier prices
and averaged nearly 2.5 percentage points below the overall growth of the U.S.
consumer price index," Littmann noted.  "Also promoting auto affordability in
1998 were average annual auto financing rates that fell to 7.52 percent from
8.09 percent in 1997.  The average auto loan shortened in maturity to 52.4
weeks from 54.1 weeks over the same period.  Another factor augmenting
affordability and spurring sales in 1998 was an average $168 increase in
incentives per vehicle," he said.
    Comerica's Auto Affordability Index is compiled from Commerce Department
and Federal Reserve data.  The Auto Affordability Index is based on total cost
of an auto divided by the median family income.  Total cost includes both
price and finance charges and is derived by calculating the average down
payment plus monthly payments over the life of the loan.
    Comerica Bank is the lead subsidiary of Comerica Incorporated ,
a multi-state financial services provider headquartered in Detroit, with
banking subsidiaries in Michigan, California and Texas, banking operations in
Florida, and businesses in seven other states.  Comerica also operates banking
subsidiaries in Canada and Mexico.  Comerica is celebrating its 150th
anniversary in 1999.