Even as new vehicle prices rose slightly toward $50,000 in July, affordability did not change, with Cox Automotive noting that wage growth offset the higher costs.
Driving the news: Together with Moody’s Analytics, Cox Automotive released its Vehicle Affordability Index for July, showing it remained almost the same as June, with just over 35 weeks of income needed to buy a vehicle.
The average transaction price tracked by Kelley Blue Book rose 0.2% month over month to $49,855.
With the average interest rate at 9.52 percent for a 72-month loan and the slight price increase, the monthly payment fell by less than 1% to $768, nearly 3% below July 2025 and below the record $795 in December 2022.
Growth in income: On the other hand, the report noted that incomes grew 4% year over year.
Those wage gains were more than double the vehicle price increases seen in the past year, which were 1.9%.
Still, as Cox Automotive Senior Director of Economics and Industry Insights Jonathan Gregory points out, the affordability index accounts for whether the median household could finance a vehicle and does not account for the cost of ownership, such as fuel, maintenance, and insurance.
Scott Vanner, Business Intelligence Manager, Economic and Industry Insights for Cox Automotive, added that, while not part of the index, “gas and insurance are real pressures on the household,” as gas prices are up nearly $1 per gallon in the past year and insurance rates are down slightly this year but are approximately 40% higher than before the pandemic.
Improved access to credit: Access to credit also improved in July, with Dealertrack noting its index hit its highest point since November 2015.
Loan approval rates rose to 74%, up 37 basis points from June and the highest level since August 2025.
The percentage of loans with terms of 72 months or longer was held at 31% for a second straight month, while down payments declined to 13%.
Vanner and Gregory agreed that the wage gains did not impact the higher percentage of approvals.
“Applicant income has drifted up some, but that's not what moved the index,” Vanner said. “The loosening is coming through structure.”
Window of opportunity: Gregory noted that while approvals drifted up 4% between March and July, subprime originations dropped from 19.5% to 16.4% in that span.
“Newly-qualified buyers are near-prime, not deep subprime,” Gregory said.
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Changing inventory: The affordability improving year-over-year and lenders approving a higher share of loans intersect with dealers looking to clear 2026 models as 2027 inventory arrives.
Gregory suggests dealers focus on clearing 2026 models before 2027 price “resets expectations” and lender spreads narrow.
Vanner noted that MY27 inventory is running lower, with dealers having about half as many MY27 units as they had MY26 at this point last year.
Bottom line: The affordability and approval improvements are “good starting points” for reading the market, according to Vanner. He and Gregory caution that the market could change, and the shrinking down payments and longer terms could have long-term impacts.
“Pay close attention to the economic conditions, because they hit your buyers and your lenders both, and what you can make work between all of that is what tells you what to stock and how to structure the deal,” Vanner said.
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