New-Vehicle Update 7/17/23:
Estimated New Car Monthly Payment $700+
New-vehicle affordability was unchanged in June, according to the Cox Automotive Vehicle Affordability Index. Strong income growth helped to offset higher prices and slightly higher rates. Higher prices and rates caused the typical payment to increase somewhat from May, which was the lowest payment since October. The number of median weeks of income needed to purchase the average new vehicle in June was steady at 43.0 weeks from an upwardly revised 43.0 weeks in May, which had been the lowest level since September.
Signs of Improved Affordability in the Near Future?
The median income grew 0.3%, and incentives from manufacturers increased, and both of those moves helped consumers with affordability. The average new-vehicle transaction price increased 0.3% in June, according to Kelley Blue Book. The typical new-vehicle loan interest rate increased by 4 basis points to 9.63%1. As a result of these changes, the estimated typical monthly payment increased by 0.2% to $771 from an upwardly revised $770 in May. The average monthly payment peaked at $795 in December.
“Looking at the macroeconomic factors that affect vehicle affordability, we could indeed see consumer auto loan rates improve even if the Fed has a move or two left,” Smoke noted. “So, I think we have threaded that needle. If we see more supply bring more discounting and incentives in the new-vehicle market and used cars are depreciating, it means affordability won’t get worse from here.”