Bucking the worsening trend throughout most of last year, new-vehicle affordability managed to improve slightly in January despite interest rates moving higher. The improvement in affordability for the month was driven by a decline in prices combined with growth in median income. The number of median weeks of income needed to purchase the average new vehicle in January declined to 42.8 weeks from an upwardly revised 43.3 weeks in December.
Cox Automotive/Moody’s Analytics Vehicle Affordability Index
The price paid moved 1.8% lower from what had been a record average price of $47,243 in December. Incentives declined slightly. The average interest rate jumped 17 basis points higher from what had been the lowest average rate for the pandemic. As a result of these moves, the estimated typical monthly payment declined 0.8% to $685 from what had been a record high of $690 in December.
After the improvement in January, new-vehicle affordability was still much worse than a year ago when prices were lower and incentives were higher. The estimated number of weeks of median income needed to purchase the average new vehicle in January was up 15% 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 March 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.