Continuing a trend that has persisted for most of this year, new-vehicle affordability improved in July, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. Strong income growth was assisted by lower prices and higher incentives that more than offset slightly higher rates. The typical monthly payment declined to the lowest level since October. The number of median weeks of income needed to purchase the average new vehicle in July declined to 42.3 weeks from a downwardly revised 42.8 weeks in June. At 42.3, it was just slightly higher than the 42.2 weeks recorded last July.
Cox Automotive/Moody’s Analytics Vehicle Affordability Index
Weeks of Income Needed to Purchase a New Light Vehicle
“The new-vehicle market has seen improving or stable affordability so far this year as consumers see discounts and incentives grow relative to the manufacturer’s suggested retail price (MSRP),” Cox Automotive Chief Economist Jonathan Smoke said. “After entering the year with affordability at an all-time low, we are finally seeing some improvement, which should allow some consumers who were priced out of the market to jump back in.”
Estimated Typical New Car Monthly Payment Declines to $762
The median income grew 0.3%, the average new-vehicle transaction price declined 0.7%, according to Kelley Blue Book, and incentives from manufacturers increased, and these moves helped consumers with affordability in July. The typical new-vehicle loan interest rate increased by 2 basis points to 9.65%1. As a result of these changes, the estimated typical monthly payment declined 0.9% to $762, from an upwardly revised $771 in June. The average monthly payment peaked at $795 in December.
New-vehicle affordability in July was only modestly worse than a year ago when prices and interest rates were both on the rise. The estimated number of weeks of median income needed to purchase the average new vehicle in July was up only 0.2% 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 Aug. 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, 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.