New vehicles have become less affordable since the pandemic started. Although things were improving in the first three months of 2024, the affordability of new vehicles took a hit again in April – the first time this year. This information comes from a new report by Cox Automotive. The report also says that car companies were not as aggressive in offering promotions and discounts in April, which made brand-new vehicles less affordable.
“The decline in affordability resulted from negative trends in pricing and incentives, as manufacturers and dealers were less aggressive on promotions and discounting than they were for the quarter end,” said Cox Automotive Chief Economist Jonathan Smoke.
While the prices of cars, especially those like the Tesla Model 3, can change often and affect how affordable vehicles are, other things like incentives and discounts also matter. The study found that the average monthly payment for a brand-new vehicle in April was $762 – a 1.8% increase compared to March. The average number of weeks needed to buy a new car also went up from 37.1 to 37.7.
But it’s not all bad news. Even though affordability decreased, it was still better than in April last year. Back then, vehicle prices were higher, and incentives were lower. Interest rates were also lower last year, but it took more weeks for an average person to buy a new car compared to this year. The estimated average auto loan rate was the lowest in nine months, but it wasn’t enough to make up for the decline in incentives offered by car companies.
The economics of selling vehicles are complicated. Many things, like manufacturing and inventory, need to be considered. Some companies, like Nissan, even let dealers sell cars below invoice prices to help sell more vehicles. The prices of vehicles, along with incentives and promotions, and people’s average income are connected. This means that the affordability of new vehicles is something we need to pay attention to because of the pandemic. Let’s hope that the decline in April was just a small problem in what is otherwise getting better this year.
