New cars are becoming harder and harder to afford.
That’s partially a simple matter of sticker price. Prices are on the way up (the average listed price for a new car price approached $42,000 in July). But it’s also a matter of time.
The Cox Automotive/Moody’s Analytics Vehicle Affordability Index measures the ability of a household earning the median income to afford the purchase of an average-priced automobile. In July, it showed that the average earner would need to work 37.4 weeks to afford the average new car.
Affordability in July was worse than at any month covered by the index data, which dates to January 2012. Cox Automotive is the parent company of Kelley Blue Book.
The news could have been worse. The estimated median income increased in July, while the average financing rate on a new car loan declined. New vehicle prices rose enough to offset those improvements in July, while the incentives manufacturers offer to bring them down fell. Even with rates slightly lower, the estimated typical monthly payment increased to a record high.
A worldwide shortage of microchips has forced manufacturers to stop or limit the production of many new cars, pushing prices higher. Dealers have faced record low inventories all summer, but the decline in available new cars appeared to stabilize in July. That is still unlikely to lead to price decreases in the short term, as demand for new cars remains high.
