Rising Prices and Rates Make New Vehicles Increasingly Unaffordable

With new-vehicle prices setting a new record and auto loan rates reaching a more-than-10-year high, new-vehicle affordability declined again in August, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. The number of median weeks of income needed to purchase the average new vehicle in August increased to 42.6 weeks from an upwardly revised 42.2 weeks in July.

Cox Automotive/Moody’s Analytics Vehicle Affordability Index

August 2022

Weeks of Income Needed to Purchase a New Light Vehicle

Besides median income which grew 0.4%, all other factors moved against affordability. The price paid for a new vehicle moved 0.5% higher to a new record, according to the latest report of Kelley Blue Book average transaction prices. Incentives declined, averaging only 2.3% of the average transaction price. The average interest rate increased another 37 basis points. As a result of these moves, the estimated typical monthly payment increased 1.4% to $743, which was another record high.

New-vehicle affordability in August was much worse than a year ago when prices were lower, incentives were higher, and rates were much lower. The estimated number of weeks of median income needed to purchase the average new vehicle in August was up 14% 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 Oct. 15, 2022.

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.