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New Vehicle Affordability Reaches All-Time Low In July 2021: Report

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Low inventory stemming from production cuts brought on by the semiconductor chip shortage has sent average new vehicle prices soaring to record highs in recent months, with both Ford and Lincoln enjoying tremendous increases in average transaction prices. And yet, shoppers continue to buy them, despite a lack of incentives and selection. Thus, it shouldn’t come as a huge surprise that new vehicle affordability also reached a record low in the month of July, according to new research from Cox Automotive.

That makes two months in a row where new vehicle affordability has hit record lows, as the number of median weeks of income needed to purchase the average new vehicle in June came in at 37.2 weeks, only to be topped by July at a slightly higher 37.4 weeks. As it turns out, things could have been much worse, as these numbers were actually “helped” by low interest rates, and estimated median incomes have been increasing as of late as well.

Otherwise, conditions are favorable for new vehicle affordability to continue its rapid descent. Average transaction prices continue to grow, while incentives continue to decline. Regardless, in spite of declining average financing rates, monthly payments reached a record high in July as well. While affordability has varied greatly over the last decade or so, the last several months have seen a sharp increase in just how much money it takes to bring home a new vehicle.

Conditions don’t figure to improve greatly until the chip shortage is over, which may not happen until June of 2022, according to Ford executives. Meanwhile, some expect the crisis to endure for several years. Regardless, Ford’s decision to move toward a more built-to-order model rather than filling its dealer lots will undoubtedly have an impact on affordability in the future as well.

We’ll have more automotive insights like this to share soon, so be sure and subscribe to Ford Authority for around-the-clock Ford news coverage.

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Brett's lost track of all the Fords he's owned over the years and how much he's spent modifying them, but his current money pits include an S550 Mustang and 13th gen F-150.

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Comments

  1. NCEcoBoost

    Bring on the Indian brands (Mahindra, etc.) to knock some sense back into this absurd market!

    Reply
  2. John

    Prices are so high and with all the electronics so much can go wrong and expensive to fix. No wonder they sold so many of the old VW bugs. Basic, affordable and reliable transportation.

    Reply

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