New vehicle affordability improved in January to its highest level in 41 months/ about three years, according to the latest Cox Automotive/Moody’s Analytics Vehicle Affordability Index.
Lower vehicle prices, higher incomes, and a decline in average monthly payments drove the positive shift.
The average price of a new vehicle dropped 2.2% for the month, following the luxury sales surge in December. At the same time, income growth rose 3.6% year over year, helping offset lower manufacturer incentives and a slight increase in interest rates.
In addition, the estimated average auto loan rate climbed five basis points to 10.09%, the highest in three months. Despite this, the typical monthly payment declined 1.3% to $755, marking a 1.7% decrease compared to a year ago. The number of median weeks of income required to purchase a new vehicle also improved, falling to 37.7 weeks from 38.2 weeks in December.
Compared to January 2024, when affordability was 5% worse at 39.6 weeks of income, new-vehicle buyers are in a stronger position despite slightly lower prices and higher interest rates. The trend reflects ongoing economic shifts that are making new cars more accessible for consumers.
The next update of the Cox Automotive/Moody’s Analytics Vehicle Affordability Index will be released on March 17, 2025.
