The average American car shopper had a slightly harder time making the transaction work in December than in November. But 2023 still ended with cars easier to afford than they’d been at the start.
The Cox Automotive/Moody’s Analytics Vehicle Affordability Index measures how long the average earner would have to work to pay off the average new car. It’s not only an esoteric measurement useful to economists but also a gut-check measurement that approximates how car shopping feels.
If paying off your new car feels like it’s taking up too much of your energy, the Cox Automotive/Moody’s Analytics Vehicle Affordability Index is probably high.
It’s a product of Kelley Blue Book’s parent company, Cox Automotive. And, in the chaos of the COVID-19 pandemic and the long recovery from it, the measurement showed a brutal truth.
It hovered between 33 and 36 weeks for most of a decade before the world economy went off the rails. Then, it hit a peak of 44 weeks in December 2022.
Slowly Making Its Way Toward Normal
So, December 2023’s measurement — 38.6 weeks — seems almost normal. It’s slightly higher than the month before. But some fluctuation is normal. In fact, “normal” is the theme of Cox Automotive’s predictions for 2024. Analysts expect a relatively tame and easy year for car shoppers, with the caveat that unexpected world events can … well … you remember 2021.
“Due to an increase in average transaction prices, new-vehicle affordability worsened month over month in December,” said Cox Automotive Chief Economist Jonathan Smoke. “However, year over year, it is in much better shape, and new-vehicle loan rates are down from their peak in October.”
The median American income grew by 0.3% in December, and dealers offered more incentives to help sell cars.
As a result of these changes, the estimated typical monthly payment increased 1% to $770 from a revised $762 in November. The average monthly payment peaked at $796 in December 2022.
