New car prices have been on a slow, steady decline throughout 2023. That’s beginning to pay dividends for car shoppers.
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 declined to 42.9 weeks in April.
(Cox Automotive is the parent company of Kelley Blue Book.)
That’s still historically high. The index hovered between 33 and 36 weeks for most of a decade before the COVID-19 pandemic changed the math of car ownership. But it’s down from a peak of 44 weeks last December.
New car buyers, in April, signed up for an average monthly payment of $766. The average monthly payment also peaked in December, reaching $792.
Median income grew last month, and manufacturer incentives helped drive the average sale price of a new car down. High interest rates, however, continue to put upward pressure on monthly payments.
“Though we are seeing some slight improvement in our index, affordability challenges are still a major barrier to the new-vehicle market,” says Cox Automotive Chief Economist Jonathan Smoke. “We continue to see subprime buyers squeezed out of the auto market by the Fed repeatedly moving rates higher. The 10 consecutive rate increases have limited who can buy vehicles to mostly high-income, high-credit-score buyers.”