As new vehicle affordability increased again in August, extending the monthly trend of moderate improvement throughout the year, income and vehicle market fundamentals continued to benefit customers. This time, robust income growth and increased incentives were sufficient to counterbalance higher prices and stable but high interest rates.
Despite a minor rise in pricing, the average payment also climbed. However, from the previous month’s revised value of 42.2 weeks to 42.1 weeks, the median number of weeks of income needed to purchase an average new car declined. This figure was slightly less than the 42.2 weeks noted in August of the previous year.
According to Kelley Blue Book, the average transaction price for a new car increased by 0.6%, although manufacturer incentives also increased. The median income increased by 0.3%. The typical interest rate on new car loans maintained a high of 9.62%. Due to these adjustments, the expected usual monthly payment climbed from a downwardly revised $759 in July to $760, an increase of 0.2%. In December, the average monthly payment reached its peak of $795.
When compared to a year ago, prices were marginally lower, but borrowing rates were more than two percentage points lower, and new-vehicle affordability in August was slightly better. The anticipated amount of weeks’ median income required in August was 1.1% less than last year.
“The improvement streak continued in August for new-vehicle affordability,” notes Cox Automotive Chief Economist Jonathan Smoke. “But how long will it survive while the UAW is on strike? History has demonstrated that the typical UAW strike unaffected the retail car industry. Still, this one might not be ‘average,’ considering that there has never been a strike that simultaneously affected all three major automakers.”