According to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index, new vehicle affordability in September showed no significant improvement, as rising vehicle prices and minimal declines in loan rates offset any potential relief for consumers.
While the average auto loan rate dropped by 30 basis points to 9.53%—the lowest rate in over a year—new vehicle prices increased by 0.8% during the same period. This led to a slight 0.2% increase in the typical monthly car payment, bringing it to $740. The amount of time a consumer needs to save for a new vehicle remained unchanged at 36.2 weeks of median income, a measure that has not improved much in recent months.
Cox Automotive’s Chief Economist Jonathan Smoke pointed out that despite a larger-than-expected rate cut by the Federal Reserve, the broader impact on auto loan rates and vehicle affordability has been minimal. “September was the first month in two and a half years in which auto loan rates decreased year-over-year, but affordability remains largely unchanged,” Smoke said.
However, September’s affordability is still better than a year ago. At this time in 2023, vehicle prices were 0.4% higher, and both interest rates and incentives were less favorable for consumers. Thanks to a 3.6% year-over-year increase in income and higher incentives, the number of weeks of income needed to buy a new vehicle has decreased by 8.4% compared to the previous year. Despite these small gains, affordability remains challenging for many prospective buyers, as vehicle costs strain household budgets.
