Report: US Median Income Could Soon Outpace Falling Car Prices

Cameron Aubernon
by Cameron Aubernon

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.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

More by Cameron Aubernon

Join the conversation
10 of 67 comments
  • Fordson Fordson on Nov 17, 2014

    With all we hear about the rich getting richer, is anyone surprised that the median income continues to rise? Does that mean cars are more affordable for your average person? No. Does anyone seem to understand the meaning of "median"? No.

    • See 1 previous
    • 319583076 319583076 on Nov 17, 2014

      The arithmetic mean and a measure of dispersion would be more useful than the median. However most consumers of this "information" aren't equipped to parse meaning, so it doesn't really matter, does it? Obviously the story is designed to fluff consumer confidence coincident with the beginning of the holiday season. Be thankful for this good news and spend freely! It will probably suceed.

  • TW5 TW5 on Nov 17, 2014

    Again, I tell you, it is easier for a camel to pass through the eye of a needle, than for a middle-class man to be without a new vehicle. But how is this possible, Teacher, when Edmunds says they can only afford to pay $16,500? Oh ye of little faith. With cash it is impossible, but with subprime lending, all things are possible!

  • FreedMike FreedMike on Nov 17, 2014

    That woman's hands are HUGE.

    • See 3 previous
    • Petezeiss Petezeiss on Nov 17, 2014

      @Lie2me Uh... yeah... her eyes are, like, lower than the mirror? That's a big thing to me. 'Cause I can't in most any vehicle. I removed the RVM in my CR-V and the result is wondrous.

  • APaGttH APaGttH on Nov 17, 2014

    120 month financing will fix everything. No money down, 125% loan - cover taxes and fees. Sign and drive and who cares if the term is almost the length of a mortgage payment. If you die, they can bury you in it!