Though new-vehicle prices still aren’t what anyone would consider low, buying new is getting more affordable, according to Cox Automotive data that shows it's the most accessible for consumers in more than three years.
Affordability has improved despite the fact that many models on the market are on the high end of the vehicle price scale, Cox said.
“The affordability story is complex,” explained Cox Economist Jonathan Smoke. “When analyzing the data, we observe that affordability is becoming less of a macroeconomic issue and more of an automotive industry issue. Automakers are opting to manufacture higher-priced vehicles, so further declines in interest rates will not significantly reduce payments. Instead, income growth will have a greater impact than interest rate changes in the auto industry.”
The Federal Reserve is expected to lower interest rates this week, which can’t hurt from the consumer’s perspective, at least overall.
Cox estimates that the average automotive loan rate already fell last month by 41 basis points to 9.95%, its lowest level in over a year and the first time in two years that it fell year-over-year.
Meanwhile, the average new-vehicle price fell nearly 1% (0.6%), while incomes increased by about 4% year-over-year and incentives grew, Cox said.
Consequently, the average new-vehicle payment fell about 2% to $737, the lowest level in two years, according to Cox, which said the number of median weeks of income required to buy the average new vehicle fell from about 37 weeks to 36 weeks, the lowest point since May 2021 and down about 9% year-over-year after peaking at $795 in December 2022.
