New-Vehicle Affordability Surges in January

Trends in new-vehicle affordability factors moved in support of consumers in January, leading to better affordability compared to December and much improvement year over year, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.

“Just as new-vehicle affordability improved in January to its best level in over two years, access to auto credit moved in the other direction,” said Cox Automotive Chief Economist Jonathan Smoke. “Income growth continued while both the average new-vehicle price and the average interest rate declined making new vehicles more affordable. However, we saw credit access to auto credit decline to its lowest level since August 2020.”

The typical payment declined 3.2%, and the number of median weeks of income needed to purchase the average new vehicle declined to 37.5 weeks from an upwardly revised 38.8 weeks in December. The January number of weeks was the lowest since August 2021.

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

Weeks of Income Needed to Purchase a New Light Vehicle

Affordability Factors Support of Consumers in January

Median income grew 0.3%, the Kelley Blue Book average new vehicle transaction price declined 2.6% compared to December 2023, and incentives from manufacturers increased slightly. The typical new-vehicle loan interest rate declined to 10.28%¹ from 10.42% in December. As a result of these changes, the estimated typical monthly payment declined by 3.2% to $751 from $775 in December. The average monthly payment peaked at $795 in December 2022.

New-vehicle affordability in January was better than a year ago when prices were higher, but interest rates were lower. The estimated number of weeks of median income needed to purchase the average new vehicle in January was down 7.7% 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 March 15, 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.