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Cost Savings Lead to More Affordable New-Vehicle Prices, NADA Finds

9 December 1997

Cost Savings Lead to More Affordable New-Vehicle Prices, NADA Finds

    WASHINGTON, Dec. 9 -- The average new-vehicle transaction
price rose just 2.8 percent in 1997 and is expected to rise even less in 1998,
according to the National Automobile Dealers Association.
    The stabilization of new-vehicle prices and falling interest rates have
translated into a major improvement in new-vehicle affordability for the
average household this year.  The average new-vehicle purchase represented 17
weeks of the typical family's income 25 years ago, peaked at 26.4 weeks in
1996 and will likely fall to 25.6 weeks in 1997.
    The rise in the average new-vehicle transaction price over the past 25
years has been driven up by the movement upscale in consumer purchasing
trends, federally mandated safety and emission equipment and significant
quality improvements and has outpaced the rate of inflation by 33 percent.  To
keep the monthly payment on a new-vehicle purchase in line with household
income, the auto industry moved from three-year financing (the most prevalent
contract until the late 1970s) to four-year financing (the term of choice in
the early 1980s) to five-year financing (dominant in the late 1980s) to
leasing, which accounts for nearly a third of all retail sales today.
    The National Automobile Dealers Association represents more than 19,500
franchised new-car and -truck dealers holding nearly 40,000 separate
franchises, domestic and import.

SOURCE  National Automobile Dealers Association