Automakers realize that consumers are more concerned than ever about the affordability of new vehicles. They received some good news in January as affordability improved for consumers when it came to new cars, trucks and utility vehicles.
According to the latest Cox Automotive/Moody’s Analytics Vehicle Affordability Index, new cars are at their most affordable point since last March. Lower interest rates combined with lower purchase prices managed to offset lower incentive spending by automakers.
“Income growth remained strong at 3.7% year over year. Lower prices, lower rates and higher incomes combined to improve vehicle affordability conditions,” officials noted in a release.
Cox noted the number of median weeks of income needed to purchase the average new vehicle declined to 35.6 weeks from 36.2 weeks in December.
The average price paid for a new vehicle fell 2.2% last month, coming in at $49,191 The average transaction price — what is paid for a car after all discounts are figured in — has been on the decline after hitting the $50K figure late last year.
Lower prices typically mean a lower monthly payment, and that was the case last month. The average car payment fell 1.4% to $756 a month — the lowest number since last March. That is still up 1.7% compared to January 2025 but continues the trend of dropping prices. The average monthly payment peaked at $795 in December 2022, Cox noted.
Automakers offered fewer incentives this January than a year ago. They were down 6.4%, and despite prices being lower last January, interest rates were higher. That combination helped to improve the affordability of a new vehicle.
Those lower interest rates greased the skids to improved access to credit. Cox noted subprime and longer-term loans were more readily available. However, negative equity also increased in January, after an improvement in December.
“Negative equity surged to 56.3%, subprime share climbed to 15.7%, and yield spreads widened 31 basis points — suggesting lenders are pricing in additional risk even as they expand access,” Cox added.
[Images: Shutterstock; Chart: Cox Automotive]
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