New Vehicle Affordability Declines in April

New-vehicle affordability declined slightly in April despite revised data indicating stronger income gains, according to the latest Cox Automotive/Moody’s Analytics Vehicle Affordability Index.

The inputs to the index again moved in differing directions in the month. The number of median weeks of income needed to purchase the average new vehicle in April increased to 40.6 weeks from a downwardly revised 40.2 weeks in March.

Supporting affordability, median income in the U.S. grew 0.3% in April. The revisions in the data for prior months were driven by updated data from the 2020 American Community Survey’s median household income estimates. The revisions to that data show income growth higher than previous estimates used to infer more recent median income data.

All other factors moved against affordability last month. The price paid moved 0.7% higher, due in part to incentives declining further. The average interest rate on a new-vehicle loan increased another 20 basis points. As a result of these moves, the estimated typical monthly payment increased 1.4% to $698, which was a new record high.

Even with the data revisions, the top-line story remains the same. New-vehicle affordability continues to be much worse now than a year ago when prices were notably lower and incentives were higher. The estimated number of weeks of median household income necessary to purchase the average new vehicle in April was up 18% from last year.

The next update of the Cox Automotive/Moody’s Analytics Vehicle Affordability Index will be published on June 15.