Both the new and used vehicle markets have been in a flux over the past couple of years as the chip shortage and other supply chain issues have led to precious little inventory and record-high prices. That means new car affordability has suffered as well, a problem that only figures to worsen as interest rates begin to rise following the Federal Reserve’s attempts to quell inflation. However, according to the latest data from Cox Automotive, that wasn’t the case in March, for the most part.
New car affordability remained fairly stable last month but has worsened since December, as the number of median weeks of income needed to purchase the average new vehicle in March came in at 42.9, which is identical to February’s figure. This offset the fact that the average price paid for a new vehicle was 0.3 percent lower in March than February, while median income also grew.
Meanwhile, incentives continued to decline while interest rates grew by 32 basis points, all of which contributed to an estimated average monthly payment of $691, which is a new record high. Compared to one year ago, the estimated number of weeks of median income needed to purchase the average new vehicle is up 18 percent.
Meanwhile, these factors – combined with ongoing supply chain issues – have led to a number of changes in the automotive industry over the past couple of years. New buyer interest in EVs is rising, thanks to surging gas prices, while many shoppers are paying significantly over MSRP for new vehicles. However, a recent study found that just 30 percent of new car shoppers are OK with paying markups, while around one-third expect to order their next vehicle.
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