New-Vehicle Affordability Hits 41-Month High in January

New-vehicle affordability improved in January to the best level in 41 months, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.

“New-vehicle affordability received a boost from the lower prices typically observed in January following the luxury brand sales surge in December,” said Jonathan Smoke, chief economist at Cox Automotive. “These lower prices, combined with higher incomes, more than offset lower incentives and a slight increase in interest rates during January.”

The estimated average auto loan rate rose by 5 basis points to 10.09%¹ in January, representing the highest average rate in three months. The average price of new vehicles decreased by 2.2% for the month, according to Kelley Blue Book. Affordability was further supported by income growth, which increased by 3.6% year over year.

In January, the typical payment declined by 1.3% to $755, which was down 1.7% year over year. The number of median weeks of income needed to purchase the average new vehicle declined to 37.7 weeks from 38.2 weeks in December. The average monthly payment had previously peaked at $795 in December 2022.

COX AUTOMOTIVE/MOODY’S ANALYTICS VEHICLE AFFORDABILITY INDEX
January 2025

Weeks of Income Needed to Purchase a New Light Vehicle

New-vehicle affordability in January was better than a year ago when it took 39.6 weeks of median income to buy an average new vehicle, which was 5.0% higher. A year ago, prices were 1.3% lower, but interest rates were higher. Incomes and incentives were also lower in January 2024.

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 17, 2025.

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 brand. 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.