New-vehicle affordability remained at its lowest point of 2025 for the second consecutive month in May, according to the latest Cox Automotive/Moody’s Analytics Vehicle Affordability Index. Despite a strong economy and modest income growth, rising interest rates and flat vehicle pricing continue to limit consumer buying power heading into the summer.
The average new-vehicle monthly payment rose slightly to $756 in May, the highest since December, though still down 1.1% compared to a year ago. This modest increase occurred even as vehicle prices held steady, reflecting the growing impact of elevated borrowing costs. The average auto loan rate in May climbed 9 basis points from April to 9.88%, a level that remains lower than a year ago by 77 basis points.
Income growth reached 3.4% year over year, while automaker incentives also increased. However, those factors were not enough to offset the affordability strain caused by persistent interest rates. As a result, the number of weeks of median income needed to purchase a new vehicle remained unchanged at 37.4, the same as in April, which was also the worst level seen in 2025.
Compared to the same month last year, affordability has improved slightly. In May 2024, it required 39.0 weeks of median income to afford the average new vehicle, which was 4.2% more than this year. While interest rates were higher then, vehicle prices were lower and incomes were weaker.
The affordability stagnation highlights a key challenge for the retail automotive market. With traditional affordability drivers like income gains and incentive boosts unable to counterbalance financing pressures, demand may soften as the industry heads into the typically active summer buying season.
Unless interest rates decline or wages accelerate meaningfully, affordability is expected to remain a drag on new-vehicle sales.
