Auto Affordability and Credit Scores Improve, Reports Say
Rising prices and a focus on repairing credit scores may have kept consumers out of dealerships for some time, but there seems to be hope on the horizon.
Yesterday, Comerica Bank revealed the best auto affordability reading since the third quarter of 2009.The purchase and financing of an average-priced new vehicle took 23.1 weeks of median family income in 4Q11. Consumers on average spent $1,050 less on new cars in the fourth quarter, down 4% from last year.
“Auto affordability improved at the end of 2011, boosted by gains in personal income that were, in turn, supported by stronger job creation,” said Robert Dye, Chief Economist of Comerica Bank in Dallas.
Just today, CreditKarma.com released its U.S. Credit Score Climate Report proving that even credit card debt fell 8% nationally since December to $6,069. Since last month, the average consumer credit score increased one point to 661 nationally, marking the first time since April 2011 that credit scores have increased.
The report compares the current credit scores of CreditKarma.com’s user base with previous scores pulled 30 to 90 days prior to the stated month. This month’s report includes a comparison of more than 376,966 CreditKarma.com user scores.
In January 2012, the average consumer with an account had $15,112 in auto loans — down 2.5% since Dec. 2011. Interestingly, states with the least amount of auto loan debt are:
- Wisconsin-$12,742
- Oregon- $13,073
- Minnesota- $13,160
- Michigan- $13,268
- Rhode Island- $13,273
“Household credit conditions are also improving, as shown by the low household financial obligations ratio, which measures total debt payments as a percentage of income. When you put those two concepts together, it means that households are increasingly willing to take on a reasonable amount of debt by purchasing an attractively priced automobile,” Dye of Comerica Bank said. “Those favorable trends are allowing consumers to feel more confident about unleashing their pent-up demand for automobiles. Favorable affordability and improved job growth mean more upside potential for auto sales in early 2012.”
