Conditions are getting better for new-car shoppers.
There are many ways to measure affordability. Prices are an obvious tool – the average new car sold for $48,623 in October.
But we think time is a more effective tool. Few Americans can afford to buy a new car with cash. The Cox Automotive/Moody’s Analytics Vehicle Affordability Index measures how long the average American would need to work to pay off the average new car.
Kelley Blue Book parent company Cox Automotive publishes the index.
It fell to 37.4 weeks in October – its lowest level since August of 2021.
Related: Is Now The Time to Buy, Sell, Or Trade-in a Car?
The index routinely hovered between 32 and 36 weeks for most of a decade before the COVID-19 pandemic upset worldwide supply chains and sent new car prices soaring. It has gradually worked its way down since peaking at 44 weeks in December of 2022.
“Auto loan rates are beginning to decline, offering some relief to consumers,” explains Cox Automotive Chief Economist Jonathan Smoke. “In October, we also observed an improvement in auto credit availability. Although new-vehicle prices remain stubbornly high, these improvements in auto credit, along with increased incentives from automakers, are driving new-vehicle sales as we approach the end of the year.”
The estimated average auto loan rate declined in October by 31 basis points to 10.20%, the lowest average rate in 15 months. However, the average new vehicle price increased by 0.2% for the month. Countering the price increase were higher incentives and income growth, which was up 3.5% year over year.
The typical monthly payment in October declined 1.5% to $743. The average monthly payment peaked at $795 in December 2022.
