Question of the Day? How Much Should a New Car Cost?
There are plenty of ways to determine what’s “affordable” when it comes to a new car, truck, or crossover. But only one that really matters: What a buyer is willing to spend.
Cox Automotive has a specific measurement that can determine “affordability.” They call it the “Vehicle Affordability Index.” Clever. It’s a monthly measure of the number of median weeks of income needed to purchase a new vehicle.
Currently it sits at 35.5 weeks for August. It’s dipped slightly each of the last four months, when it was 34.9 weeks in May. Basically, it’s how many weeks of pay is needed to buy a vehicle. However, it’s an average. Plus, it’s not really the definition of affordable. It’s some percentage of income someone with a lot of letters after their name has determined is optimal for an overall budget.
The current average transaction price is $50,089. It’s the number you get after you take the sticker price and exclude incentives, trade-in, taxes, fees or finance and insurance. The average monthly car payment? $770, up slightly from July. That’s what people are willing to pay. However, what is affordable in your mind? $35K? $435 a month? Let us know what you think is affordable.
[Images: Toyota, Ford]
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Michael Strong has spent more than 25 years writing about the automotive industry. A Detroit-area native, he’s written about everything from local car shows to product reviews to financial news. Currently he writes and edits for a variety of national and local publications. He’s also a longtime member of the Automotive Press Association and the International Motor Press Association, and a graduate of Georgia Southern University. Hail Southern! Despite a love for ’70s land yachts and BMWs from the late ’80s and early ’90s, his personal vehicle is neither of those.
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Cars should be like computers, TVs and other tech products: They should be getting cheaper over time. Instead, government regulations keep the price high. And manufacturers welcome the new regulations for obvious reasons.
"The average monthly car payment? $770, up slightly from July. That’s what people are willing to pay."
No, that is the amount they are paying after being lied to mostly by ads, social media, KBB and JD Powah.
Cost per pound of a new Honda CR-V Hybrid is around $9.87.
Cost of beef sirloin is about $12.08 per pound, so you can see the vehicle prices have more room to run.
(Simple division, are you going to argue with math?)