New-vehicle affordability improved for the first time in 6 months in January, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. Declining new-vehicle prices, increasing incentives and improving incomes offset challenges from auto loan rates reaching a new 20-year high. The number of median weeks of income needed to purchase the average new vehicle in January declined to 44.0 weeks from an upwardly revised 44.7 weeks in December.
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 $780
Supporting affordability, median income grew 0.6%, incentives from manufacturers increased, and the average new-vehicle transaction price declined 0.6% in January from December. The average interest rate increased another 12 basis points to 9.51%1. As a result of these mixed moves, the estimated typical monthly payment declined 1.0% to $780, from an upwardly revised $788 in December, which was a record.
“Even if rates drift higher, the dynamics point to how affordability could stabilize – or even improve – if we continue to have growth in incentives, moderating prices and improving incomes,” said Cox Automotive Chief Economist Jonathan Smoke. “That said, the average payment is in a different stratosphere that inherently limits the potential market as long as prices and rates stay near these levels.”
New-vehicle affordability in January was much 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 January was up 8% 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, 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 January, 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.