The Rising Influence of Rising Affluence

[Mufaso]

Barron's - "Cars Are Finally Getting More Affordable. Here’s Why."

https://www.marketwatch.com/articles/cars-are-getting-more-affordable-heres-why-44925aaa
Published: March 1, 2024 at 8:30 p.m. ET
By Al Root

The high cost of new cars has bugged buyers—and investors—since the pandemic. Now they’re looking more affordable. The average cost of a new car is roughly $47,000, up about $10,000, or 33%, from 2019. But interest rates are off highs and the average price is down almost $3,000 from the peak.

Since late 2019, wages are up about 21%, while new-car prices are up 29%. Barron’s took wages, interest rates, and new-car prices to calculate a vehicle affordability index. The index averaged about 56 in 2019’s second half, hit almost 66 in December 2022, and today is at 61—in the middle. (For new car buyers, the lower the reading of the Barron's New Car Affordability Index the better [.)

Another 3%, or $1,500, off the new-car price—with wages up 3% and a percentage-point drop in rates—would restore affordability to 2019 levels. Still, things aren’t “normal.” Fewer vehicles are coming off leases because fewer cars were sold from 2020 to 2022. Some 10 million cars are “missing,” says Lindland. Lower used inventory means used-car pricing might persist longer—and, since the two are linked, so might new-car prices./quote]