In Australia, we’re lucky. It is as affordable to buy a car today as it was in 1976. Eighteen months ago, a person on the average wage would have had to work for around 32 weeks to afford either a Holden Commodore or a Ford Falcon. Today that time has reduced to just 30 weeks – exactly the same length of time it would have taken a worker in 1976 to buy a Holden Commodore Omega or a Ford Falcon XT auto. Unlike things such as groceries, which we complain about being more expensive, cars have become more affordable.
The affordability extends beyond the popular, basic models. We can now also more easily afford a luxury car. Models such as the BMW 320i and Porsche Boxster Roadster are becoming realistic for more Australians. The strong Australian dollar is partly to thank for our good fortune. Along with tariff reductions from 57.5% in 1985 to 5% in 2010, this has led to a larger volume of car imports, making the market more competitive. Australian manufacturers have to cut prices to keep up. And we must not forget that our wages have improved steadily over time - in fact, they have grown more than car prices.
We’re getting more for our money?
Features we enjoy as standard on our new cars, such as GPS, iPod connectivity and parking sensors, were out of sight for the 1976 buyer. Not to mention the much improved car safety. Dollar for dollar, we get more for our money nowadays. And we’ve got more left over to spend on other things.
We’re even more able to buy into luxury. In 83 weeks, the average Aussie can work their way to owning a dream car, such as a $111,000 Porsche Boxter Roadstar. In 2002, this would have taken 130 weeks. Whether or not the car is ever purchased, it serves to illustrate how things have improved economically, along with our general standard of living.
Crunching the numbers
Our price comparisons are the result of detailed price and market investigations performed by CommSec and the Australian Automobile Association. Car prices have been tracked over time, using the NMRA Open Road magazine, then paired up with data on average weekly earnings to estimate affordability. When this information is coupled with historical data on vehicle cost and ownership the figures emerge:
A Holden Sedan cost $4,336 in 1976 and the average male wage was $182.10 a week. It would have taken around 24 weeks’ work to buy the car. Today, a Holden Commodore Omega costs $39,990 and the average male wage is $1417 a week. There is not much difference in the time it takes to buy the equivalent car today - around 29.9 weeks’ work. The Ford Falcon XT, with a price tag of $40,290, takes around 30.1 weeks.
These CommSec figures are called affordability measures and they were higher five years ago, at 33 weeks for the Holden Commodore Omega V6 auto and 34.3 weeks for the Ford Falcon XT 4.0L auto sedan.
Some imported models have shown impressive improvement; the CommSec car affordability measure for a BMW 320i 2.0L 6AS sedan is 41.9 weeks, down from 51.1 weeks five years ago. And the coveted Porsche Boxster 2.9L 7ADCT Roadster is at 83.3 weeks, down from 108.5.
The broader economic picture
The consumer and media focus is solely on things that have become more expensive over time, ignoring the wide range of goods and services that have become more affordable. In addition to cars, these include TVs, phones, electrical goods and travel.
Rather than concentrating on price it is worth considering the measure of affordability, and shifting attention away from specific items to get a broader picture.
The standard of living in Australia continues to improve. In keeping with this, it is anticipated that as concern over the financial crisis wanes, spending will increase during 2012.
Finally, in spite of increased car affordability, it might be argued that Australians should benefit even more: The list price of a Porsche Boxster in the UK is around half of that in Australia, at £37,589 including VAT, or A$56,953.
Regardless of car import costs, the high Aussie dollar, internet shopping and price comparisons will mean complex price pressure for Australian retailers and importers alike.