It grew easier for Americans to afford a new vehicle in March, and not just because of falling prices.
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 42.4 weeks in March. That’s still a high number by historical standards — the index hovered around the 34-week mark from 2012 until March 2021. But it’s now in steady decline.
Cox Automotive is the parent company of Kelley Blue Book.
The price of the average new car fell below the manufacturer’s suggested retail price (MSRP) in March — the first time in 20 months that most Americans have paid less than sticker price for a new car. Other factors worked in buyers’ favor, as well. Incentives rose as dealers found themselves with growing new car inventories.
The average income rose in March, Cox Automotive says, and “a lower average new auto loan rate reduced the average payment to the lowest level since September 2022.”
The good news isn’t enough to make new cars a reasonable investment for many buyers. “Even with three consecutive months of improvement, affordability challenges are limiting access to the new-vehicle market by lower income and lower credit quality buyers,” says Cox Automotive Chief Economist Jonathan Smoke. Subprime loans — for buyers with below-average credit — have “decreased substantially since 2019,” Smoke says.
Deep subprime loans have effectively disappeared. “This trend induces automakers to focus on profitable products for consumers who can afford to buy, which keeps less affluent consumers out of the new-vehicle market altogether and limits what is available and possible in the used market for years to come,” Smoke cautions.
