The high cost of new cars has bugged buyers—and investors—since the pandemic. Now they’re looking more affordable. The average cost of a new car is roughly $47,000, up about $10,000, or 33%, from 2019. But interest rates are off highs and the average price is down almost $3,000 from the peak.
Since late 2019, wages are up about 21%, while new-car prices are up 29%. Barron’s took wages, interest rates, and new-car prices to calculate a vehicle affordability index. The index averaged about 56 in 2019’s second half, hit almost 66 in December 2022, and today is at 61—in the middle.
Buyers can expect more improvement, says Rebecca Lindland, senior director of industry data and insights at
Cars Commerce.
“Almost half of shoppers plan to spend under $30,000 for a new car,” she says, but only 13% of new cars are priced under $30,000. And yet, “[low-price availability] is 63% better than last year at this time.” As production and inventory continue to recover, she sees a shift from a seller’s to a buyer’s market.
Another 3%, or $1,500, off the new-car price—with wages up 3% and a percentage-point drop in rates—would restore affordability to 2019 levels. Still, things aren’t “normal.” Fewer vehicles are coming off leases because fewer cars were sold from 2020 to 2022. Some 10 million cars are “missing,” says Lindland. Lower used inventory means used-car pricing might persist longer—and, since the two are linked, so might new-car prices.
Write to Al Root at allen.root@dowjones.com
Last Week
Markets
Bitcoin
topped $60,000 and neared a record. Congress returned and passed a short-term spending plan, and the
Nasdaq Composite
and
S&P 500
hit new highs. The Fed’s favorite inflation measure rose 2.4% in January over a year ago. On the week, the
Dow industrials
sagged 0.11%, the S&P 500 was up 0.95%, and the Nasdaq added 1.74%.
Companies
Warren Buffett warned in his annual letter to
Berkshire Hathaway
shareholders that there were no transformative deals out there and “no possibility of eye-popping performance.” Still, the company reported strong earnings, including big gains in Japanese stocks…The Justice Department opened an antitrust probe into
UnitedHealth.
..
Microsoft
invested in French AI company Mistral…
Apple
reportedly abandoned building an electric car. Its next big push: AI.
Deals
China’s Ant Group outbid U.S.-based Citadel Securities to buy Credit Suisse’s China securities business from
UBS.
..
Alcoa
agreed to buy Australia’s Alumina for $2.2 billion…
Chevron
warned its $53 billion deal for Hess could fall apart after
Exxon Mobil
and China’s
Cnooc
asserted a right to counteroffer for Hess’ 30% stake in a Guyana oil project, in which Exxon holds a 45% stake…The Federal Trade Commission sued to block
Kroger’s
$25 billion deal to buy rival grocer
Albertsons.
Milestone
Vanguard said Chairman and CEO Tim Buckley, 55, plans to retire at the end of the year.
Write to Robert Teitelman at bob.teitelman@dowjones.com
Next Week
Tuesday 3/5
Fourth-quarter earnings season winds down, as more than 90% of S&P 500 index companies have already reported. Only a handful large-cap companies announce results this week, including Target before the opening bell on Tuesday, followed by CrowdStrike Holdings and Ross Stores after the market close.
Broadcom,
Costco Wholesale,
and Kroger release earnings on Thursday.
Wednesday 3/6
Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee as part of the Semiannual Monetary Policy Report to Congress. Powell appears before the Senate on Thursday.
Friday 3/8
The BLS releases the jobs report for February. Consensus estimate is for an increase of 200,000 in nonfarm payrolls, while the unemployment rate is expected to remain unchanged at 3.7%. On Feb. 2, January jobs growth surprised to the upside, as it has for much of the past two years, as the economy added 353,000 jobs, more than double expectations. The stock market initially sold off when the data were released on concerns the Federal Reserve would delay cutting interest rates but ended that day in the green and rose 5.2% in February, the index’s best February showing since 2015.
Email: editors@barrons.com
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