New-Vehicle Affordability Deteriorated Modestly in December

The affordability of new vehicles showed a modest decline in December compared to the previous month due to mixed trends. However, new-vehicle affordability improved year over year, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.

“Due to an increase in average transaction prices, new-vehicle affordability worsened month over month in December,” said Cox Automotive Chief Economist Jonathan Smoke. “However, year over year, it is in much better shape, and new-vehicle loan rates are down from their peak in October.”

The typical payment increased by 1.0% in December, and the number of median weeks of income needed to purchase the average new vehicle increased to 38.6 weeks from a downwardly revised 38.3 weeks in November. The November number of weeks was the lowest since August 2021.

COX AUTOMOTIVE/MOODY’S ANALYTICS VEHICLE AFFORDABILITY INDEX
DECEMBER 2023

Weeks of Income Needed to Purchase a New Light Vehicle

Vehicle Affordability Improves Year Over Year

Median income grew by 0.3%, the Kelley Blue Book average new-vehicle transaction price increased by 1.3%, and incentives from manufacturers rose. The typical new-vehicle loan interest rate declined to 9.66% ¹ from 10.27% in November. As a result of these changes, the estimated typical monthly payment increased 1.0% to $770 from a revised $762 in November. The average monthly payment peaked at $796 in December 2022.

New-vehicle affordability in December was better than a year ago when prices were higher, but interest rates were lower. The estimated number of weeks of median income needed to purchase the average new vehicle in December was down 6.7% 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 Feb. 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.