LOS ANGELES, Jan. 14, 2015 /PRNewswire/ -- Requisite Press, LLC reported today a December 2014 Auto Buyer's Affordability Index (ABAI) of 51.3, indicating that a prudent, median-income household can only afford 51.3 percent of the new-car average price. The ABAI decreased 3.2 percent from last month, largely driven by a 3.6 percent jump in the average transaction price (ATP) for new light-vehicles. Support for higher prices came in the form of a sharp rise in consumer confidence, plunging gas prices, and continued generous credit offers. However, Requisite Press expects new-car affordability to improve in 2015 as pricing pressures increase.
Consumers entered into the holiday car-buying season with confidence, as indicated by a jump of nearly 5 percent in the December Consumer Confidence Present Situation Index*. Plunging gas prices, including a 20 percent drop in December, topped the news throughout the holidays. Increased consumer spending continued to be supported by generous credit offers, including the availability of long-loan terms, high loan-to-value limits, and attractive lease deals.
"All the stars aligned in December to push new-car prices higher," said Phil Kelton (@Phil_Kelton), President of Requisite Press. "However, affordability is likely to continue improving in 2015 as pricing pressures increase, assuming continued income growth."
Downward pressure on new-car prices is anticipated from multiple sources, including lower used-car prices caused by an increasing supply. In addition, the supportive financing environment may begin to erode in the latter half of the year as risk levels increase and interest rates begin to rise.
Requisite Press encourages new-car buyers to maximize their own personal affordability score, thereby preserving household financial security. Consumers can easily keep an eye on affordability throughout the car buying process by using AffordCheck (SM), a free online tool developed by Requisite Press.
AffordCheck (SM) is available at:
The December ABAI of 51.3 is based on a median household income of $53,880, a light-vehicle average transaction price of $31,550, and adherence to the 20-4-10 auto financing rule. This equates to an affordable monthly payment of $319 and price of $16,188.
The monthly ABAI was developed to enable buyers to easily view current new-car prices in the context of sound financial advice. The 20-4-10 auto financing rule consists of a minimum 20 percent down payment, a maximum 4-year loan term, and monthly payments of no more than 10 percent of gross household income. The rule is widely recommended by personal finance experts to maintain financial security, avoid excessive interest costs, and preserve future investment opportunities.
For additional information:
*The December Conference Board Consumer Confidence Present Situation Index is 98.6, up 4.9 percent from November.
Requisite Press, LLC was founded in 2012 to publish select expert information with great potential for consumer quality-of-life improvement. In addition to publishing the monthly Auto Buyer's Affordability Index and providing AffordCheck (SM), a free online 20-4-10 rule calculator, Requisite Press, LLC also published Power Shift: The New No-Stress, No-Hassle Way to Get the Best New-Car Deal—Every Time! Power Shift enables individual consumers to minimize new-car prices while obtaining an improved car-buying experience.
SOURCE Requisite Press