New Vehicles Have Become Less Affordable: Study
According to the Sherlocks at Cox Automotive, Americans saw new-vehicle affordability decline in December and reached a new low for the 2022 calendar year.
And, in other news, the sky is blue and water is wet.
In all seriousness, an analytic report released this week shows just how far out of reach a new car is getting for some buyers in this country. While median income apparently grew just 0.4 percent, the average price paid for a new vehicle increased by 1.9 percent, rocketing up to $49,507.
This is where the ‘affordability calculator’ comes into play. Cox and Co say they use data from multiple government and industry sources as a unique indicator to calculate the number of weeks of median household income needed to purchase an average new vehicle. This time around, that figure reached a high of 44 weeks, up from 43.3 in November. It crossed the 40-week threshold about a year ago and hasn’t looked back. In late 2019, for example, it was roughly 32 weeks.
The study also put a number on loan rates, which Cox says reached a new 20-year high during the last twelve months. Interest rate hikes, combined with the higher car prices have brought the estimated typical monthly payment up by 2.1 percent to $777, says Cox. Those are decidedly not lucky sevens. It’s one thing for the average price of a new rig to climb into the stratosphere but it’s quite another for those numbers to be compounded by loan terms which compound the problem and make the paper even more unaffordable.
This builds on our report from the other day in which we learned a record number of customers have signed themselves up for four-figure monthly payments. According to Edmunds, 15.7 percent of new vehicle customers in the fourth quarter of 2022 signed up for the privilege of sending a lender $1,000 or more per month for their new car. This, despite the average down payment climbing to a record $6,780 in Q4 of last year.
[Image: Vitpho/Shutterstock]
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Matthew buys, sells, fixes, & races cars. As a human index of auto & auction knowledge, he is fond of making money and offering loud opinions.
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“If you can afford an F-150 and like it…”
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