December Affordability Dip Doesn’t Tell Full Story
New-vehicle buying conditions far better than a year earlier as market shifts to the buyer.
The number of weeks of median income needed to buy the average model was down about 7% year-over-year in December.
IMAGE: Pexels/Antoni Shkraba
Despite inflation and high interest rates, new-vehicle affordability is on the rise, though it dipped slightly in December on mixed conditions. Year-over-year, though, affordability is up, Cox Automotive said.
The average monthly payment rose 1% while the median number of weeks of income needed to buy the average model ticked up slightly from 38.3 to 38.6. Still, November’s median was the least since August 2021, Cox said.
The upticks came due to an increase in average transaction prices in December.
“However, year over year, it is in much better shape, and new-vehicle loan rates are down from their peak in October,” said Cox Chief Economist Jonathan Smoke.
Compared to a year earlier, December looked good from the consumer’s perspective. The number of weeks of median income needed to buy the average model was down about 7%.
Helping consumers were growth of median income – 0.3% – a decrease in the average new-vehicle loan interest rate from 10.3% to 9.7%, and growth in manufacturer incentives. Balancing those was a 1.3% increase in the average transaction price. The mix of conditions resulted in an estimated average monthly payment of $770, up from $762 in November.
The average monthly payment peaked in December 2022 at $796, Cox said.
Originally posted on Auto Dealer Today
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