New-vehicle affordability improved again in February following modest improvement in January, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. All factors helped as declining new-vehicle prices, increasing incentives, improving incomes and slightly lower average new auto loan rate, as calculated by Moody’s Analytics, reduced the average monthly payment for a new vehicle to the lowest level since October 2022. The number of median weeks of income needed to purchase the average new vehicle in February declined to 43.2 weeks from an upwardly revised 44.2 weeks in January.
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 $765
The median income grew 0.3% in February, and according to Kelley Blue Book, incentives from manufacturers increased and the new-vehicle average transaction price declined 1.4% in February from January. The average new-vehicle loan interest rate declined 31 basis points to 9.17%1, as calculated by Moody’s Analytics. As a result of these changes, the estimated typical monthly payment declined 1.9% to $765, from an upwardly revised $781 in January. The average monthly payment peaked at $789 in December 2022.
“With prices easing down and incentives moving higher, new-vehicle affordability has slightly improved to start 2023,” said Cox Automotive Chief Economist Jonathan Smoke. “However, to put the payment in perspective, the typical American household can afford a car payment of around $400 a month. With an average monthly payment of nearly twice that, the new-vehicle market remains heavily skewed toward the most affluent buyers.”
New-vehicle affordability in February was still worse than a year ago when prices were lower, incentives were higher, and rates were lower. The estimated number of weeks of median income needed to purchase the average new vehicle in February was up 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 April 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 February, 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.