New vehicles grew more affordable for the average American in January, but the numbers are coming down from such a high that it feels ridiculous to say that.
The Cox Automotive/Moody’s Analytics Vehicle Affordability Index measures how long the average earner has to work to pay off the average new car. It fell to 44 weeks at the end of January. That number would have been comically high two years ago. But it’s down from 44.7 weeks in December.
The index is a product of Kelley Blue Book parent company Cox Automotive.
January saw the index tick down for the first time in six months.
Several factors converged to break the heat wave by half a degree. New vehicle prices fell, with the average new car selling for $49,388 – 0.6% lower than a month before. Median incomes rose 0.6%, and carmakers added new incentives (though incentives remain at historic lows).
The average interest rate increased another 12 basis points to 9.51%. As a result of these mixed moves, the estimated typical monthly payment declined 1.0%.
That decline, however, only brought the average monthly payment down to $780 from December’s record $788.
It could be the start of a trend.
“Even if rates drift higher, the dynamics point to how affordability could stabilize – or even improve – if we continue to have growth in incentives, moderating prices and improving incomes,” said Cox Automotive Chief Economist Jonathan Smoke. “That said, the average payment is in a different stratosphere that inherently limits the potential market as long as prices and rates stay near these levels.”
