Affordability improved for the second straight month, driven by lower prices, rising incomes, and stronger incentives.
On the Dash:
- New-vehicle affordability improved in July, aided by higher incomes, lower prices, and stronger incentives.
- Average monthly payments fell to $748, with median weeks of income needed dropping to 36.8.
- Incentives and income growth are making new vehicles more attainable despite elevated interest rates.
New-vehicle affordability improved for the second consecutive month in July, reaching its best level since March, according to the Cox Automotive and Moody’s Analytics Vehicle Affordability Index. The shift follows a brief decline tied to tariff announcements earlier this year and reflects lower vehicle prices, higher consumer incomes, and increased manufacturer incentives.
The estimated average auto loan rate held steady at 9.63% in July, down 108 basis points compared with the same month last year. Average vehicle prices fell slightly by 0.1% from June, while year-over-year income growth remained solid at 3.4%. As a result, the typical monthly payment decreased 0.4% from the prior month to $748, marking a 1.7% drop from July 2023 and the lowest monthly payment since March.
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The number of median weeks of income needed to purchase a new vehicle also declined to 36.8 weeks from 37.0 weeks in June. For context, the average monthly payment peaked at $795 in December 2022. Compared with July 2023, consumers now require 4.7% fewer weeks of income to buy the average vehicle, even though prices were slightly lower and interest rates higher a year ago.
The improvement in affordability is largely attributed to automakers’ incentive programs, steady income growth, and modest price adjustments, which together are easing the financial burden on buyers. Analysts note that while interest rates remain above historical norms, the combined effect of these factors is making new vehicles more attainable for consumers.
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