Price of a new car hits 30-year low -- but not in California

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Californians may not agree, but a new car is more affordable to the average family now than at any time in the last 30 years, according to a new report.

Buyers can expect to see an average of $2,931 in incentives off the price of a new vehicle. In some cases, such as buying a Chrysler, a consumer can expect to get as much as $6,000 off the price of a new vehicle as dealers seek to move inventory amid a recession -- and in Chrysler’s case, a bankruptcy -- and a sudden downshift in sales nationwide.

The average price of a new vehicle nationwide is $1,700 less than in the final quarter of 2008, according to Comerica Bank’s Auto Affordability Index, which has tracked auto prices since 1979.

California buyers likely will see a smaller drop in average price. A temporary 1% rise in the state’s sales tax that began April 1 and a doubling of license fees to arrive May 19 add about $400 to the average price of a new car. A provision of the nationwide economic stimulus package, however, allows them to write off a portion of the sales tax and license fee on any new vehicle bought between Feb. 17 and Dec. 31 this year.

Nationally, the survey found it took 21.5 weeks of work for a median family to buy an average-priced new car or truck, or 1.3 weeks less than in the fourth quarter of 2008. It also found that consumers are getting better interest rates from dealers as credit slowly returns to the market. Financing, though, may not be available to as many potential buyers as before.

Dana Johnson, a senior economist at Comerica, tells The Times: ‘It’s really two things: long-term and short-term trend conditions. In the long term, car prices are rising more slowly than incomes. There’s a lot of productivity and competition in the auto industry, and like other durable goods, the price of autos is rising slowly compared to income. The index also captures the cost of financing and [in the short term] there haven’t been a lot of times to finance a car with interest rates so low.’

Attributing the increase in auto inventories to ‘the recession and the mess in the credit markets,’ Johnson says: ‘Credit has become cheaper, and we’re reflecting average interest rates paid on loans, [but] many lenders have become pickier about credit records and who they want to lend to.’

Nationwide, the interest rate averages about 7% on a new-car fixed-rate loan of $20,000 for a buyer with good credit, according to HSH Associates Financial Publishing. In Los Angeles, the average loan rate is 7.3%. Sweeteners such as ‘dealer employee pricing’ offers are becoming commonplace but zero-percent financing often is difficult to attain.

‘We are still seeing that rates are not as low as people would expect them to be,’ said Peter Welch, president of the California New Car Dealers Assn. ‘An awful lot of people have fallen behind on credit payments, or mortgage or car payments. Dealers tell me a lot of these 0% rates are for those with a [credit score of] 700 or higher, and if you’re under 700 it’s still a struggle. We don’t have the complaint that they’re not finding people to finance.’

In these strange economic times, it may even be cheaper in some cases to buy a new car rather than a late-model auto, according to a recent Edmunds.com study.

-- Craig Howie, LATimes.com