Dive Brief:
- New cars became slightly less affordable for U.S. households from May to June, according to a Cox Automotive and Moody’s Analytics analysis.
- However, new car affordability was better in June compared to the same time last year. In June 2023, new vehicles were 0.6% more expensive and the country’s median household income was lower.
- “Dealers and manufacturers became less aggressive with pricing due to widespread software disruptions,” said Jonathan Smoke, chief economist at Cox Automotive, in a press release. Despite higher inventories, average vehicle incentives, such as discounts, declined.
Dive Insight:
Dealerships nationwide felt the impact of last month’s CDK cyberattack. Outages slowed car sales, with new vehicle days’ supply increasing to 116 days as of early July compared to 81 days’ supply in early June, according to Cox Automotive.
Though inventory was elevated in the latter half of June, the value of vehicle discounts and rebates fell between May and June.
New vehicle affordability experienced a slight decline in June, with U.S. households needing a median 37.2 weeks of income to purchase the average new car in June as compared to the median 37.1 weeks of income needed in May, according to the Cox Automotive/Moody’s Analytics Affordability Index.
While the average interest rate for a car loan declined to 9.83% in July — the lowest rate in the past year — and median household income grew, the average monthly car payment rose by 0.6% for an average monthly car note of $756, according to the affordability index.
The affordability index measures the number of weeks a household earning the U.S. median income would need to work in order to purchase the average new vehicle. Cox Automotive and Moody’s Analytics calculate affordability by measuring median household income, interest rates, and vehicle transaction prices.
Though affordability declined somewhat in June, Cox reported that the number of weeks of median income needed to purchase the typical new vehicle fell 6.3% year over year. Still, vehicle affordability remains markedly down compared to 2019, with prices much higher than they were before the pandemic.
Meanwhile, inventory is expected to return to normal over the next couple of months. Experts at Cox Automotive believe discounts and rebates on new vehicles will remain and may even increase.
