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New car affordability dips as rising prices outpace discounts
Averages prices jumped $699 last month, but incentives helped fend off the rising expense. (2 min. read)
Marcus Amick
December 17, 2024
New vehicle affordability declined slightly in November as rising prices outpaced the benefits of lower interest rates and higher incentives, according to the latest Cox Auto data.
Driving the news:
The average transaction price (ATP) for a new vehicle rose to $48,724, up $699 (1.5%) year-over-year, according to Kelley Blue Book.
Incentives averaged 8% of ATP in November, up from 7.8% in October and 5.3% in November 2023 — a year-over-year jump of more than 50%.
Average auto loan rates declined in November to their lowest level in 15 months.
Still — monthly payments crept up to $756, increasing 1% from October, while the median weeks of income needed to buy a new car edged up to 37.9 weeks.
Why it matters: Rising car prices are testing consumers’ budgets just as automakers ramp up incentives to maintain sales momentum. For some buyers, higher transaction prices and increasing monthly payments continue to push new vehicles out of reach, despite better inventory and discounts. Many dealers, meanwhile, are relying on incentives to move cars and keep demand flowing, but as a result, competition is intensifying.
The big picture: Despite rising prices, new car inventory hit 3 million units for the first time since 2020, helping to fuel a sales boost to 1.36 million units in November.
The seasonally adjusted annual rate (SAAR) climbed to 16.5 million, the strongest pace since spring 2021.
What’s next: “If sales volumes in November are any indication, we think 2024 will end on a positive note for the auto business. Yes, prices are trending higher year over year, but higher incentives and discounts are bringing in buyers.” said Cox Automotive’s Erin Keating.
The bottom line: While incentives are helping to keep sales steady, affordability remains fragile at best.
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