New-Vehicle Affordability Improved Slightly in April
Monday May 15, 2023
New-vehicle affordability improved slightly in April and contributed to improving new-vehicle sales, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. Most factors helped as declining new-vehicle prices, increasing incentives and improving incomes offset a small increase in the average new auto loan rate. The typical monthly payment declined to the lowest level since October 2022. The number of median weeks of income needed to purchase the average new vehicle in April declined to 42.9 weeks from an upwardly revised 43.2 weeks in March.
Cox Automotive/Moody’s Analytics Vehicle Affordability Index
Weeks of Income Needed to Purchase a New Light Vehicle
Estimated Typical New Car Monthly Payment Declined to $766
The median income grew by 0.3%, incentives from manufacturers increased to the highest point in a year, and the average new-vehicle transaction price declined slightly in April. The average new-vehicle loan interest rate increased by 3 basis points to 9.52%1. As a result of these changes, the estimated typical monthly payment declined 0.3% to $766, from an upwardly revised $769 in March. The average monthly payment peaked at $792 in December 2022.
“Though we are seeing some slight improvement in our index, affordability challenges are still a major barrier to the new-vehicle market,” said Cox Automotive Chief Economist Jonathan Smoke. “We continue to see subprime buyers squeezed out of the auto market by the Fed repeatedly moving rates higher. The 10 consecutive rate increases have limited who can buy vehicles to mostly high-income, high-credit-score buyers.”
New-vehicle affordability in April remained worse than a year ago when prices and interest rates were lower. The estimated number of weeks of median income needed to purchase the average new vehicle in April was up 4.9% from last year.
Click here for the full methodology for the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.
The next update of the Cox Automotive/Moody’s Analytics Vehicle Affordability Index will be published on June 15, 2023.
1 The index input of the average interest rate paid by consumers is calculated to reflect a 72-month, fixed-rate loan. For the Dealertrack estimated, volume-weighted average new loan rate in April, 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 company. 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.