If you are starting to feeling like you have enough financial breathing room to buy a new car, you are not alone. Cars became a bit more affordable for consumers in the second quarter of 2012, according to the Comerica Auto Affordability Index. Auto affordability has been on the rise for the last year, with the purchase and financing of an average-priced new car taking 22.9 weeks of median family income during this year's spring quarter.
While affordability improved by 0.3 weeks of median family income compared with the first quarter, it was not enough to increase car sales, says Robert Dye, chief economist at Comerica Bank. Dye says, "Tepid job creation and slow-t0-moderate income growth in the second quarter weighed on retail sales, even though interest rates remained near historic lows."
While it pays to be financially savvy by negotiating a good deal on the price of the car and getting the best possible interest rate on your car loan, the best strategy to making sure you can afford your car for the long haul is to set a budget that is equal to no more than 25 percent of your annual household income for all costs associated with all the cars in your household.
Tara Baukus Mello writes the cars blog as well as the weekly Driving for Dollars column, providing both practical financial advice for consumers as well as insight into the latest developments in the automotive world. Follow her on Facebook here or on Twitter @SheDrives.