New cars haven’t been this affordable since May of 2021.
There are many ways to measure affordability. Prices are one way – the average new car sold for $47,870 in August.
But we think time is a better measure. Few Americans can afford to buy a new car with cash. So 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.
That time frame is almost back to pre-pandemic normal. It routinely moved between 32 and 36 weeks for most of a decade until the COVID-19 pandemic hit. But that crisis distorted supply chains worldwide and sent it soaring. It peaked at 44 weeks in December of 2022.
Last month, it fell to 36.1 weeks – its lowest reading in 39 months.
The Federal Reserve Board is widely expected to cut interest rates at its meeting tomorrow, which could further lower the number. However, that will take time, as analysts say any cut in the Fed rate won’t reach new car shoppers until later in the year.
It’s also not the only thing keeping prices high.
“The affordability story is complex,” said Cox Automotive Economist Jonathan Smoke. “Automakers are opting to manufacture higher-priced vehicles, so further declines in interest rates will not significantly reduce payments. Instead, income growth will have a greater impact than interest rate changes in the auto industry.”
Still, the average monthly payment on a new car loan fell 1.6% in August to $737 – its lowest level in two years.
