New-vehicle affordability declined slightly in August, according to the latest Cox Automotive/Moody’s Analytics Vehicle Affordability Index. Higher prices outweighed lower interest rates, continued income growth and a smaller pullback in incentives.
The estimated average auto loan rate decreased by 2 basis points to 9.49%1, which was 1 basis point higher year over year. The average new-vehicle price increased 0.5% for the month to $50,090, according to Kelley Blue Book’s August average transaction price report. At the same time, income growth in August improved 0.3% from July. Lower rates and higher incomes were not enough to offset the increase in vehicle prices.
Cox Automotive/Moody’s Analytics Vehicle Affordability Index
Weeks of Income Needed to Purchase a New Light Vehicle
The typical payment increased 0.5% month over month to $770, which was up 2.6% year over year and well below the December 2022 peak of $795. The number of median weeks of income needed to purchase the average new vehicle increased to 35.5 weeks, modestly up from 35.4 weeks in July.
New-vehicle affordability was better than a year ago in August, even though prices were 1.9% higher because interest rates were nearly flat and incomes were higher. Incentives were 7.3% lower than a year ago. New-vehicle affordability improved by 1.2% compared to a year ago, when it took 35.9 weeks of median income to purchase the average new vehicle.
Click here for the full methodology for the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. Follow the link to review the full series of Vehicle Affordability Index reports.
The next update of the Cox Automotive/Moody’s Analytics Vehicle Affordability Index will be published on Oct. 15.
1 The index input of the average interest rate paid by consumers is calculated to reflect a 72-month, fixed-rate loan. For the latest Dealertrack estimated volume-weighted average new loan rate, visit the Auto Market Snapshot.
The Cox Automotive/Moody’s Analytics Vehicle Affordability Index (VAI) is updated monthly using the latest data from government and industry sources, including key pricing data from Kelley Blue Book, a Cox Automotive brand. This important industry measure will be released at mid-month to indicate if the prices paid for new vehicles are moving out of consumers’ financial reach or becoming more affordable over time.
