The affordability of new vehicles improved slightly in February, with consumer income growth and manufacturer incentives playing a pivotal role in offsetting higher prices.
According to the latest Cox Automotive/Moody’s Analytics Affordability Index, affordability moved 0.7% lower in February compared to last year thanks to higher income growth and improving incentives. The index tracks new car pricing, income growth, and interest rates, and measures how long the average person would have to work to pay off a new car. Cox Automotive is the parent company of Kelley Blue Book.
Going Deeper
The average price of a new car reached $49,353 last month, 3.4% higher than a year ago. The average monthly payment remained essentially flat at $756, down 0.1% from January. To put it in perspective, the average monthly loan payment peaked at $795 in December of 2022.
Doing all that math can be hard. In plain language, affordability depends on the mix of consumer car prices, median household income, amount financed, and interest rates.
Car Buying Landscape
The impact of the war in the Middle East has begun to push up loan rates. Data for February’s report was gathered before the conflict began.
Many buyers still find new vehicle prices out of reach. “With inflation above the Fed’s target, many households are facing financial stress from rising food, fuel, and healthcare costs compounded by an uncertain job market, making vehicle affordability a persistently complex challenge,” according to the report.
If a new car is too much of a strain on your budget, as it is for many Americans, you might want to consider a used car. The average used car price dipped slightly last month, to $25,287 — or nearly half the average cost of a new model.
