New Cars More Affordable Than Ever in US History?
MP: Isn't it interesting that new cars have become increasingly affordable over time? In 1995 it took almost 31 weeks of family income to purchase a new car, compared to only 22 weeks of family income today, a whopping 29% reduction in the price of a new car, measured in weeks of income. Or we could say that it takes 9 fewer weeks of income today to buy a new car compared to 14 years ago. Imagine what 9 additional weeks of income could buy for a typical family purchasing a new car today, now that that amount of their income doesn't go towards the purchase of the car.
Why have new cars become increasingly so much more affordable over time? It's most likely a combination of: a) falling new car prices (even as quality and standard options have increased), b) lower interest rates for auto loans, and c) rising income. Although Comerica's series here only goes back to 1995, it's probably true that new cars have never been more affordable in U.S. history than today, which translates into a rising standard of living for all Americans.
And yet as economist Stephen Rose wrote in the Washington Post in 2007:
The American middle class is fighting for its life -- or at least that's what Lou Dobbs would have you believe. The CNN anchor's rants about "the war on the middle class" are probably the most prominent examples of such economic doom-saying, but he isn't alone. Democratic presidential candidates pepper their debates with references to the assault; leading liberal thinkers argue that supply-side conservatives captured the Republican Party during the Reagan administration and implemented policies that continue to privilege the super rich today. They tell a compelling tale of middle-class decline. Pity it isn't true.