Data Point
New-Vehicle Affordability Improved in August to Best Level in 39 Months
Monday September 16, 2024
Article Highlights
- New-vehicle affordability improved in August to the best level since May 2021 as every factor moved in the consumer’s favor.
- The number of median weeks of income needed to purchase the average new vehicle declined to 36.1 weeks, reaching the lowest level since May 2021.
- The typical payment in August declined 1.6% to $737, the lowest in two years.
New-vehicle affordability improved in August to the best level since May 2021 as every factor moved in the consumer’s favor, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. Factors leading to improved new-vehicle affordability include lower prices and interest rates and higher incomes and incentives.
“The affordability story is complex,” said Cox Automotive Economist Jonathan Smoke. “When analyzing the data, we observe that affordability is becoming less of a macroeconomic issue and more of an automotive industry issue. Automakers are opting to manufacture higher-priced vehicles, so further declines in interest rates will not significantly reduce payments. Instead, income growth will have a greater impact than interest rate changes in the auto industry.”
COX AUTOMOTIVE/MOODY’S ANALYTICS VEHICLE AFFORDABILITY INDEX
August 2024
Weeks of Income Needed to Purchase a New Light Vehicle
The estimated average auto loan rate declined in August by 41 basis points to 9.95%1, the lowest average rate in more than a year. August was the first month in two years when the average rate was lower year over year. The average price of a new vehicle in August decreased by 0.6% for the month but remained within the same range as the past two-plus years, with growing incentives. Income growth continued, resulting in a 3.6% improvement year over year.
The typical payment in August declined 1.6% to $737, the lowest in two years. The number of median weeks of income needed to purchase the average new vehicle declined to 36.1 weeks from a downwardly revised 36.8 weeks in July, reaching the lowest level since May 2021. The estimated number of weeks of median income needed to purchase the average new vehicle in August was down 8.7% from last year. The average monthly payment peaked at $795 in December 2022.
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, 2024.
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 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.