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Auto Affordability Improves Again during Third Quarter of 2012

During the past 30 years, new vehicles have been more affordable for American families in only six of 120 fiscal quarters, compared with the third quarter of 2012. According to Comerica's Auto Affordability Index, it required 23.1 weeks of median family income for the July-September time frame this year to purchase and finance an average-priced new vehicle.

"Income growth through Q3 was weak, but interest rates on auto loans fell, lifting affordability," said Robert Dye, chief economist at Comerica Bank in Dallas. "Sales may ease a bit in coming months, but ample credit availability and a low rate environment remain positives for the auto market," he added.

Since 2000, vehicles have generally been more affordable than in the previous two decades, reaching a peak Auto Affordability Index in 2009. Affordability steadily increased during the first three quarters of 2012. However, Dye warns that the trend could reverse in early 2013: "Downside risk from the fiscal cliff is significant for auto sales and many other U.S. economic variables through the first half of 2013."

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