- The Washington Times - Thursday, July 17, 2008

There seems to be bad economic news everywhere right now, but there are small pockets of positive news. One is the affordability of new cars and trucks, which a respected banking index reports is the best consumers have seen since 2002.

Continuing sluggishness in dealer showrooms means those in the market for a new vehicle have plenty in their favor - despite a new effort by many manufacturers to raise prices.

First, the good news if you’re a buyer: Dallas-based Comerica Bank’s quarterly Auto Affordability Index showed that in the first three months of 2008 vehicles were more affordable than they’ve been for six years.

The number of weeks required to work to purchase a vehicle is the lowest since 2002 — and approached lows not seen since 1980. Comerica’s Affordability Index says in the first quarter it took 23.9 weeks of a median family’s income to purchase an average-priced new vehicle.

The average new-vehicle price in the first quarter was a pretty reasonable $24,627, the lowest quarterly average in more than two years.

The main reason is that with consumer confidence low and spending slowing, automakers have cranked up incentives — the money or cut-rate financing they use to entice you to buy a new vehicle.

Industry incentive-watching guide, Edmunds.com, said the average manufacturer’s incentive was $2,483 per vehicle sold in May, up a significant 5 percent from May 2007.

For U.S. automakers — GM, Ford and Chrysler — whose lineups are heavy with fuel-hungry pickups and SUVs suddenly nobody wants — the incentive number was much larger: a $3,489 average incentive per vehicle sold.

Those are giant rebates, obviously contributing to making vehicles more affordable. Comerica Chief Economist Dana Johnson also observes that buyers have started to opt for the more affordable, fuel-efficient vehicles.

Typically smaller cars and crossover vehicles don’t wear the hefty sticker prices of full-size pickups and SUVs.

“It’s a buyers-market and the producers are being forced to offer bigger discounts in one form or another,” Johnson said. “Buyers also are holding down their driving costs by choosing smaller, more fuel-efficient cars.”

Comerica’s latest Affordability Index number reflects the interaction between supply and demand. Demand is relatively soft, so car companies are in a fierce fight for market share.

“Car prices have been falling for a long time,” Johnson added, although it’s not been as dramatic for high-tech things such as computers and other electronics.

If you’re thinking of buying, then now could be a good time. Despite falling demand and those big incentives, many automakers are gearing up to actually raise prices. Seems kind of illogical to raise prices when people aren’t buying what you’re making, but the pricing trends and higher costs for raw materials are killing carmakers’ profits, and many figure they’ve got no choice but to raise prices — even if they simply turn around and give a lot of it back with those hefty incentives.

GM, for example, is raising prices by 3.5 percent, or an average of about $1,000 per vehicle for its 2009 models. Chrysler is hiking prices by 2 percent, and many other manufacturers are likely to follow.

Another “hidden” price increase to watch for: a bump in delivery charges. The delivery or “destination” charge amounts to hundreds of dollars for each vehicle, and in many cases this fee, which used to be something most could afford to overlook, now is approaching $1,000.

Several automakers have cooked in some plump increases in the delivery charge, so before you buy, it pays to compare prices of the vehicle you want to last year’s model.

Nonetheless, Comerica’s Affordability Index — and the continuing trend of big incentives — proves that if it’s your time to buy a new vehicle, the numbers definitely are on your side.

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