New-Car Prices Likely To Stall In 2016

New-Car Prices Are Likely to Stall this Year, Offering Savvy Shoppers a Buying Opportunity, Says Requisite Press

LOS ANGELES, Jan. 13, 2016; Requisite Press, LLC reported today a December 2015 Auto Buyer's Affordability Index (ABAI) of 57.9, indicating that a prudent, median-income household can afford 57.9 percent of the new-car average price. The ABAI was down from last month's value of 59.0, but up nearly 13 percent year-over-year. Affordability was driven up by an increase in the median household income (MHI) of more than $2,800 last year, whereas the average transaction price (ATP) remained below peak 2014 levels throughout the year. Downward pressure on prices is expected to increase this year as market forces intensify, enabling additional gains in new-car affordability. Consumers will benefit from improving affordability, and if properly informed, can easily obtain additional savings.

The ABAI rose 6.6 points year-over-year (51.3 to 57.9), largely driven by an increase of $2,866 in the MHI. The ATP was up two percent in December, but remained below the December 2014 peak value throughout 2015. Market forces that kept a lid on prices last year—waning U.S. sales growth, increasing supply of nearly new vehicles, and rising interest rates—are expected to intensify this year. As a result, manufacturers will face increased pressure to compete on price.

"New-car prices were essentially flat in 2015, and more of the same is expected this year," said Phil Kelton (@Phil_Kelton), President of Requisite Press. "Consumers will benefit from improving affordability, and can gain additional savings with this simple strategy—avoid third-party buying services, broadcast the sales opportunity to multiple dealers, and buy from the best."

Direct consumer access to the new-car marketplace is now easier than ever before (even as third-party buying services offer access for a price). New-car buyers, if armed with the right information, can easily gain the benefit of robust competition without the historical hassle. Requisite Press intends to expand consumer access to such information this year.

The December 2015 ABAI of 57.9 is based on a median household income of $56,746, a light-vehicle average transaction price of $31,365, and adherence to the 20-4-10 auto financing rule. This equates to an affordable monthly payment of $360 and price of $18,163.

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.

The index is published each month, along with additional information and analysis, at the following location:

http://www.requisitepress.com/ABAI

Requisite Press, LLC, founded in 2012, is the publisher of the consumer-focused Auto Buyer's Affordability index. In addition to the index, 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 consumers to maximize savings while obtaining an improved car-buying experience.