New-Vehicle Affordability Little Changed in October Despite Higher Interest Rates

Income growth favored consumers enough in October to offset the impact of higher prices, lower incentives, and higher auto loan rates. New-vehicle affordability improved slightly month over month and year over year, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.

“In October, strong income growth and smaller financed amounts helped the consumer overcome negative vehicle market dynamics,” said Cox Automotive Chief Economist Jonathan Smoke.

The typical payment increased by 0.2%, but the number of median weeks of income needed to purchase the average new vehicle declined to 38.6 weeks from a downwardly revised 38.7 weeks in September. At 38.6, it was lower than the 40.1 weeks recorded last October.

COX AUTOMOTIVE/MOODY’S ANALYTICS VEHICLE AFFORDABILITY INDEX
OCTOBER 2023

Weeks of Income Needed to Purchase a New Light Vehicle

Vehicle Affordability Improves Year Over Year

Both median income and the Kelley Blue Book average new-vehicle transaction price increased by 0.3% in October, while manufacturer incentives decreased. The October data included substantial upward revisions to estimates of median income following the release of the Federal Reserve’s latest Survey of Consumer Finance. The typical new-vehicle loan interest rate increased to 10.55%¹, which was a new peak. As a result of these changes, the estimated typical monthly payment increased by 0.2% to $767 from an upwardly revised $766 in September. The average monthly payment peaked at $795 in December 2022.

New-vehicle affordability in October was better than a year ago when prices were higher, but interest rates were more than two percentage points lower. The estimated number of weeks of median income needed to purchase the average new vehicle in October was down 3.7% 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 Dec. 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 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.