Consumers found new vehicles less affordable in April as their incomes didn’t keep pace with prices and interest rates.
Though transaction prices and automotive loan rates edged up for the month, household income grew more slowly, Cox Automotive said, and that mix doesn’t include other areas of inflation, including gas prices.
Cox estimates that the average auto loan rate rose nine basis points to about 9.5% while the average transaction price increased nearly a percentage point to $49,461 as incentives waned.
Average monthly payments rose 1.3% from March to $757, pushing up the number of median weeks of income needed to buy the average new vehicle from 34.9 to 35.2.
Meanwhile, household incomes rose just 0.3%, leading to reduced buying power on its own, let alone increased prices for gas, food and other essentials.
Despite all that, according to Cox’s calculations, new-vehicle affordability is better than a year earlier based on the fact that new-vehicle prices were about 2% higher.
“While monthly payments in April were higher year over year by 1%, the estimated number of weeks of median income needed to purchase the average new vehicle was lower by 2.8%,” said Jonathan Gregory, Cox senior director of economic and industry insights.