July continued a trend of improving new-vehicle affordability as the industry normalizes from the pandemic.
Falling vehicle prices and increased incentives combined with robust income growth to more than compensate for higher interest rates, Cox Automotive said, the average monthly payment falling to its lowest point since October.
Cox said the number of median weeks of income needed to afford the average new vehicle fell month-over-month from 42.8 weeks to 42.3 weeks, up just one-tenth of a point year-over-year.
Affordability, which became a concern during the pandemic due to supply-and-demand pressures brought on by constrained supply, has improved for most of the year, Cox said.
“After entering the year with affordability at an all-time low, we are finally seeing some improvement, which should allow some consumers who were priced out of the market to jump back in,” said Chief Economist Jonathan Smoke.
Median income increased 0.3% in July while the average new-vehicle transaction price fell 0.7%. The estimated average monthly new-car payment fell 0.9% to $762; it peaked in December at $795, Cox said.