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Nice data work…
Nice chart, but the X axis should be flipped the other way.
Yep, in this orientation a person could fairly easily see the opposite of what it actually shows.
If the X axis were flipped the other way, the data would still show at the top of the chart for this year, only on the left side. Did you mean flip the Y axis? That would give you a graph that falls to the right to a lower point in recent years
Jeez, I didn’t catch that. It’s the Y axis but damn, what are they thinking?
Which seems to confirm an urban legend that middle market families buy cars that are one half of their annual gross income.
What I’d like to know is at what income levels does that rule break down?
Y axis needs to be flipped. At a passing glance it looks like cars are getting more UNaffordable
What was the “affordable car?” I like the inverted Y-axis (higher == better) but I did have to look twice to see what it really meant. Did they inflation adjust to 1996 dollars? Not enough context to see what this really means…
Our family is abnormal – we spend no more than 3 weeks income on a car (we buy cheap used cars, that is).
We are the same. We have a 1985 Volvo 240 wagon in our ‘stable’ for which we paid $1100′. It has no dents, dings, scratches, rust and the paint shines up nice. It has 300k+ and all the modern conveniences I will ever need – air conditioning, power steering, power brakes, 4-speed with overdrive, and a new Alpine stereo with iPod connectivity in the glove box. It’s dirt cheap to insure and parts are plentiful and should remain so.
What I see is that people need 23-weeks worth of their income to buy that new car, without mention of any other recurring expenses that they may have like rent, mortgage payments, utilities, food, etc. So if a person’s weekly income BEFORE taxes and deductions is $1200 (40hrs at $30p/h) then they should be able to buy a new vehicle which retails for $27,600. Even if amortized over a 60-month repayment plan, those monthly payments are far more than what most people have left over after paying their monthly living expenses. In a two-income household that can work unless the formula is applied to the total household income in which case the payments are still more than what the couple has left over after paying all their taxes, deductions and living expenses. This makes cars less affordable in the real world than they have ever been during the fifties, sixties, seventies, eighties and nineties.
Here are some historical comparison points for how many weeks of median family income it took to buy the median priced car:
1960: 24 weeks
1970 23 weeks
1980: 21 weeks
1990: 28 weeks
Keep in mind cars last much longer now than back then, and require less maintenance. But don’t ask what a college education, health insurance, and a few other choice things cost back then.
Getting a reasonable computer was pretty expensive in the ’60s, though…
In all seriousness, from reading a bunch (too many) old PopSci and PopMech mags, it seems that people traded cars in every two years, many every year, in the ’50s and ’60s. It also seems that it was expected due to the horrible unreliability – half of the wretched things came off the lot broken, and it was cause for celebration when a manufacturer managed to make a model that tended to ship with its doors put on straight. Trade-in value was talked about a LOT.
So yeah, things are almost certainly cheaper in real terms than they were then. And the inflation adjusted prices were pretty high for what the cars were.
What I’d like to know about that graph is – which car? The median car? The cheapest new car you can get? I mean, you can get some pretty bad cars for not much money… but that doesn’t make cars that people actually want to (and do) drive more affordable.
I think it would also be interesting to know how they define family income. Is this an average income of all families in the US, or only those in a certain range? What is the value they are using for average income and average car price? Is the average family income recalculated on a year by year basis on this graph due to changes in the economy, or is it a base value adjusted for inflation?
It’s a neat idea, but without some hard numbers behind it and an explanation of where the numbers come from, it doesn’t seem to be worth a lot.
These are government numbers for average or median (after tax) family/household income. And the car prices are for the median price of a new car.
Good adds, Paul. Except that all key US income stats are reported pre-tax, unless specifically denoted as after tax. In any event I am having trouble recreating Comerica’s number since the most recent US median family/household income is near $51K, which a $25,500 auto price represents half, or 26 weeks versus Comerica’s 21.9 weeks.
Nice stats Paul. But we should also keep in mind that the cost of rice and rent has greatly increased leaving less disposable income to be spent on cars, motorcycles, boats, ATVs, Jetskis and Snowmobiles, as an example. When I bought a new 1971 IH TravelAll for $6500 that was big bucks, way back then, but my mortgage payment was only $161 per month. The cost of living was much lower than it is today, and I made a lot less money. Forward to today and we find that our 2008 Highlander Limited AWD cost us $40K before taxes and fees, and my 2011 Tundra DCab 2WD LB cost me $32K before taxes and fees. Our mortgage, if we had one, would be between $3K and $4K every month, not to mention the cost of food and utilities. Where I made $200 a week by myself in 1971, and could live quite comfortably on that money raising two kids, a young family of today would have to make at least $3K a week with both partners working to achieve that same standard of living as I had way back then. And I was a little under the median income at that time, since my wife stayed home with the kids while I worked. Cars MAY last longer today, and there are more warranty protections in place to help owners of lemons keep their fruit running longer, but for mainstream America it also takes a decidedly larger chunk of their income. Now, the fact that overwhelmingly more people choose to buy a foreign brand car or a transplant made in America, speaks to the fact that those buyers believe that those cars offer longevity for the money in addition to better quality and greater value. Mainstream cars should have actually cost less than they do today given the technology and improved robotic assembly methods. That’s a big problem in America: there aren’t enough affordable new cars on the market.
Cars are also much safer, faster, better-handling, more comfortable, more fuel-efficient, and better equipped. Heath-care and higher education are about the only things that cost more work hours than back in the day (and health care, of course, is much better than it was). Otherwise, virtually everything else is much cheaper. See here for some comparisons about how many hours of work it takes to buy things:
http://cafehayek.com/2006/01/working_for_sea.html
Here’s the whole article, with some perspective:
http://comerica.mediaroom.com/index.php?s=122&item=1034
The chart shown above omits the earlier part of the curve, which goes back to 1979 and 23 weeks, respectively: http://i.bnet.com/blogs/bmp_affordability.bmp?tag=content;drawer-container
Here’s a mystery: Cars seem to become more affordable during a recession. Is this due to mfrs cutting their own throats to move the metal?
Is this a subtle Terry Pratchett Cut-Me-Own-Throat-Dibbler reference?
To make it more meaning what is the Average weekly wage (AWW)? With that info we could now start comparing vehicle prices across the world, especially with global cars, i.e. Jeep, Chysler, variuos flavours of Chevrolet (Daewo) etc.. I would personnally like to think that when we purchase a Jeep Grand Cherokee 3.6 V6 Auto laredo for approximately $45,000 AUS and you guys can buy one for about $30,215 US that it takes us both the same amount of AWW.
Because $45,000 AUS = $45,158 US and $30,215 US = $30,116 AUS
So we are getting ripped off by about $AUS15,000 to ship a car from the States to Oz, or the distributer in Oz is charging what the market can bear.
My understanding is that in places like .nl, .nl, and .dk, you’ll pay $40k+ for the equivalent of a stripper Ford Focus. So, count your blessings.
Have no idea whether cars or other goods in Oz are priced plus taxes or included. North Americans are bombarded by additional federal, state, and local taxes, so prices are quoted with no tax included. It’s a rotten system, since these can add a great deal to the price, and are a direct throwaway — you get no credit for them at resale time.
The system also allows government to collect the same percentage of tax from the second and subsequent purchasers, so it’s a never-ending treadmill. You gotta register that vehicle you bought used, correct.
In the UK, used cars are not subject to more tax. I presume the same is true wherever sane tax policies are in force. The item is taxed once when it’s new, and that’s it.
So. I went to Ford Netherlands and found that a 1.6 litre Ecoboost Focus is 24K Euros including the 19% VAT, or about $32K US. This becomes the value of the vehicle and is how it is depreciated from then on.
A much better system than we enjoy in Canada, and probably most of the US. Imagine, the value of the goods you buy actually being worth the total price you paid. What a concept.
I am too lazy to argue or offer rebuttal but invite those who care and interpret as they desire the many graphs and charts the Web can offer that display other economic indicators that show or suggest that income/costs/other economic arenas have altered over time in areas that result in declining purchasing abilities, especially for folks in the lower income demographics.
Interpretations vary and, as always, question the source since preconceived notions can and will affect how data is displayed.
obbop, the lower demographics are not what they used to be, either. One of my kids makes $90K a year, his wife makes less than $60K. You would think that with a gross of $150K combined they could live a reasonably comfortable life. Not so! They are in the lower demographic for their area. Their mortgage is $3490 a month since buying in 2006, their utilities and food for a family of two adults and one young child is ginormous which leaves very little money left over for gas and transportation. So what do they drive? He, a 2004 Toyota Tacoma standard cab 4-banger stick shift. She, a 2008 Hyundai Elantra automatic. Affordability perceptions may be in the eye of the beholder, but all of us have to live in the real world regardless of what the perceptions of others tell us what is affordable.
…and there is the best evidence of what got us into this mess to begin with. That with a mere $150k of combined income the banks will loan you the cash for a $3,500 monthly payment. When buying my first house last year I was absolutely shocked at how much they were still willing to loan at prime terms (no points, bankrate low rates).
There’s only so much leftover for the cars after these numbers. Highdesertcat, be glad your kids are bright enough to live within their means as far as the cars go, and aren’t complete knuckleheads who are leasing the 335i just because they can ‘afford’ the $500 lease payment.
vbofw, sometimes we all are victims of circumstance. By that I mean that if you live in an area where $250K+ is the median income, and the prices of homes START at $300K for a two-bedroom fixer-upper, you have little choice but to stick yourself in debt for $345K for a 2600 sq-ft used home, if you don’t want to rent. But the point of the article is that cars today are more affordable. To that I take exception since the author fails to take in consideration that the cost of living has risen dramatically in America, just within the last decade. If there ever was a trend to affordable cars, this is the reason why the base models of the Yaris, Accent, Elantra, Fit, etc sell out every year, and why losers like the Aveo et al, mostly marketed by the American car manufacturers continue to languish on the lots of dealers and distributors. I have read elsewhere that Americans in droves prefer to buy the worst from Toyota over the best from Detroit. And the reason is clear: the cheapos from the foreigners run better and last longer than anything Detroit has to offer us. If we are trending to disposable cars where we buy them new and run the pi ss out of them and then recycle them, the foreigners have the market cornered. What we really need is for Detroit to offer us affordable cars equal to or better than what the foreigners offer us. That may happen in the future, but we can look back over the past 40 years or so and see absolutely no indication that Detroit is able to do that, what with union demands for ever higher wages and benefits, and job banks, all the while cranking out the same trash they have been for decades. Does anyone remember the sales hype of the Cobalt, or the Fiesta, etc? Does anyone remember the quality assembly of the same? Gaps that ran from 1/16th to 1/2″? How about pieces falling of? Loose nuts and bolts. I had them on ALL my domestic cars of the past. What held up was the Corolla, the Civic, etc. Americans are not stupid. They are looking for affordable transportation, and they have been finding it in foreign-brand offerings.
I don’t think there are any areas where median income is $250k. There are 20 places with median income >$200k, which are some of the smallest (between 100 and 3,000 people), most isolated places in the US.
Perhaps it just seems like the median income is higher since their neighbors are living well beyond their means!
In any event, cars are more affordable when put in the context of income. Just because you point out housing costs are going up (even though we’re actually reaching historic lows for housing costs – see today’s Case Shiller report), doesn’t mean cars aren’t taking-up a smaller percentage of the average Joe’s take home pay. Others above have also pointed out today’s cars last much longer (like the 2004 Tacoma – which I’d be proud of!), making the effective purchase price less.
I guess the point is we can squabble on the details, but cars are a much smaller portion of the average family’s budget than in the past.
http://en.wikipedia.org/wiki/Highest-income_places_in_the_United_States#Places_with_median_household_incomes_in_excess_of_.24200.2C000
Back in the early 1960’s, we needed a different car, because the 1953 Dodge my parents owned at the time was shot. My dad wanted a nice 1956 Dodge 4 dr. sedan, blue and white, but could not get a loan for – are you ready? – $600.00!!! Imagine that and my mom and dad’s disappointment and embarassment that they could only afford a $400.00 loan. I overheard some of that conversation at the bank, too, and sensed that it wasn’t pretty and saw the shame in my dad’s face. They had to settle for a 1955 Dodge Royal Lancer, 2 dr. hardtop – beautiful three-tone paint, but a piece of garbage as it was in the shop seemingly every 6 months with something wrong. So, what is an “affordable” car? Depends on income, bottom line. A new car? Never for my parents, just a pipe dream. It still hurts to relate that experience some 50 years later, too. We were a “working-poor” family, if you had to categorize where we were on the food chain.