New-Vehicle Affordability Improved in July to Best Level in Three Years

New-vehicle affordability improved in July to the best level in three years as incentives grew and rates drifted lower, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.

“New-vehicle affordability saw an improvement in July, even as auto credit availability declined,” said Cox Automotive Chief Economist Jonathan Smoke. “Consequently, while new vehicles might be somewhat more affordable, they are harder to obtain due to the continued weak performance of auto loans.”

The estimated average auto loan rate declined in July by 30 basis points to 10.22%¹, the lowest average rate in a year. The Kelley Blue Book average new-vehicle transaction price was unchanged for the month, but incentives grew. Income growth continued, resulting in a 3.7% improvement year over year.

The typical payment declined 1.5% to $753, and the number of median weeks of income needed to purchase the average new vehicle declined to 37.0 weeks from an upwardly revised 37.6 weeks in June. The average monthly payment peaked at $795 in December 2022.

COX AUTOMOTIVE/MOODY’S ANALYTICS VEHICLE AFFORDABILITY INDEX
JULY 2024

Weeks of Income Needed to Purchase a New Light Vehicle

New-vehicle affordability in July was better than a year ago when prices were 0.2% higher, but interest rates were slightly lower; however, incomes and incentives were also lower a year ago. The estimated number of weeks of median income needed to purchase the average new vehicle in July was down 6.2% from last year. The last time that the number of weeks was lower was in July 2021.

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 Sept. 16, 2024.

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 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.