Driving the news: New car affordability hit a wall in May, reaching a new low in 2025 as tariffs continue squeezing buyers despite a strong economy.
For context: The Cox Automotive/Moody's Analytics Vehicle Affordability Index shows it takes 37.4 weeks of median income to buy the average new vehicle—unchanged from April. Average monthly payments crept up to $756, the highest since December, while auto loan rates increased 9 basis points to 9.88%.
WHY IT MATTERS
Cox Automotive Chief Economist Jonathan Smoke says tariffs have created a "swift and measurable impact on vehicle affordability" that's neutralizing the usual market forces. "The forces that typically drive improvement—like incentives and income growth—have been neutralized by stubbornly high interest rates and stagnant prices," he explained.
What we're watching: Income growth remains solid at 3.4% year-over-year, according to Cox. And incentives are helping offset some pressure, but it's not enough to overcome the affordability squeeze.
The silver lining: Affordability is still better than May 2024, when it took 39 weeks of income to buy a new car.
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