Comerica Index: Auto Affordability, Incentives on the Rise

(MoneyWatch)  In a bit of good news for consumers -- and clearly bad news for the domestic carmakers -- vehicles were more affordable in the first quarter of 2008 than at any other time since immediately after the Sept. 11 terror attacks of 2001. "It's a buyers market and the producers are being forced to offer bigger discounts in one form or another," said Dana Johnson, chief economist at Comerica Bank in Detroit, in a May 9 announcement.

The Comerica Affordability Index measures the number of weeks of median family income it takes to buy the average-priced light vehicle, including finance charges. For the first quarter, the index was at 23.9 weeks. That was 0.6 weeks below the fourth quarter of 2007, and down 1.1 weeks from the year-ago quarter.

To jump-start auto sales following Sept. 11, General Motors introduced zero-percent financing. Ford Motor Co. and then-DaimlerChrysler followed suit. The Affordability Index hit a low of 23.8 weeks back then, in the fourth quarter of 2001, the lowest point since 1980.

Pricing had staged a modest rally from the automaker point of view through the fourth quarter of 2005, which marked a recent high of 26.6 weeks. With some zigs and zags, pricing since then has gotten more and more unfavorable for the automakers, and better for consumers, since consumers facing high gas prices have needed persuading. Comerica said that with finance charges, the average light vehicle cost $28,389 in the first quarter of 2008.

Separately, Edmunds.com said on May 1 that incentives hit an estimated $4,247 per vehicle in April for Chrysler LLC, up from $3,835 a year earlier. That was the highest of the Detroit 3 manufacturers. Ford Motor Co. was next, at $3,044, up from $2,972; General Motors incentives were $2,803, down from $3,248, Edmunds said.

Incentives were much lower for the biggest Japanese brands, which have benefited from a turn to more fuel-efficient vehicles. Edmunds estimated April incentives for Nissan North America Inc. at $1,953, up from $1,890 a year earlier; American Honda Motor Co. Inc. at $1,076, down from $1,439; Toyota Motor Sales U.S.A. Inc. was at $714, down from $880.