According to the Cox Automotive/Moody’s Analytics Affordability Index, new vehicle affordability experienced a slight decline in June. Dealers and manufacturers were less aggressive with pricing due to widespread software disruptions, according to Cox Automotive Chief Economist Jonathan Smoke. Despite this, consumers benefited from rising incomes and lower interest rates, which kept overall affordability better than last year.
The estimated average auto loan rate fell by 13 basis points in June to 9.83%, marking the lowest average rate in a year. Continued income growth resulted in a 3.7% improvement year over year.
The typical monthly payment for a new vehicle increased by 0.6% to $756, while the median weeks of income needed to purchase the average new vehicle rose to 37.2 weeks from 37.1 weeks in May. The average monthly payment had previously peaked at $795 in December 2022.
New vehicle affordability in June was better than a year ago when prices were 0.6% higher, interest rates were slightly lower, and both incomes and incentives were lower. The estimated number of weeks of median income needed to purchase the average new vehicle in June was down 6.3% from the same time last year.
Overall, the automotive market showed signs of improvement, with the drop in interest rates and the increase in consumer incomes helping to offset the slight rise in vehicle prices and loan payments.
