Executive Summary
New-vehicle affordability improved in January, reaching its strongest level since March 2025 as lower prices and slightly lower loan rates combined with higher incomes. The median “weeks of income” needed to buy the average new vehicle fell to 35.6 from 36.2 in December. The typical monthly payment declined 1.4% month over month to $756 (lowest since March 2025), though it remains 1.7% higher than a year earlier.
What Changed in January
- Loan rates eased: estimated average new-vehicle rate dipped 2 bps to 9.52% and is 26 bps lower year over year.
- Prices softened: average transaction price fell 2.2% to $49,191 (Kelley Blue Book).
- Incomes rose: median income up 3.7% year over year.
- Incentives pulled back: down 6.4% year over year, yet overall affordability still improved.
Key Metrics Snapshot
- Weeks of income: 35.6 (from 36.2 in Dec.).
- Typical monthly payment: $756 (−1.4% MoM; lowest since Mar 2025; prior peak $795 in Dec 2022).
- Average transaction price: $49,191 (−2.2% MoM).
- Estimated average loan rate: 9.52% (−2 bps MoM; −26 bps YoY).
- Median income: +3.7% YoY.
- Affordability index (YoY): improved by 1.8% versus January 2025.
Why It Matters
Lower borrowing costs and moderating prices, along with rising incomes, enhanced buying power even as incentives were leaner. This dynamic lowered the “weeks of income” measure and pushed the average payment to its lowest level since March 2025, a reference point noted as the period when tariffs were first announced.
Methodology Notes
- Index jointly produced by Cox Automotive and Moody’s Analytics; updated monthly.
- Incorporates government and industry data; key pricing from Kelley Blue Book.
- Interest-rate input reflects a 72‑month, fixed-rate new-vehicle loan.
Outlook
January’s results extend gradual improvements seen from late 2025 into early 2026. The next update, due March 16, will indicate whether the momentum carried into February.
