New-vehicle affordability improved in May, as lower transaction prices, higher incentives, and strong income growth more than offset a slight increase in interest rates.

The estimated average new-vehicle auto loan rate increased by 8 basis points to 9.53%, which was lower year over year by 11 basis points. The average vehicle price, according to Kelley Blue Book estimates, decreased 0.5% for the month to $49,220. Income growth remained strong at 4% year over year. The combination of lower prices and higher incentives helped even out the impact of higher interest rates on new auto loans.

The typical monthly payment for a new vehicle purchased in May decreased 0.5% to $753, which was up 0.6% year over year. The number of median weeks of income needed to purchase the average new vehicle declined to 34.9 weeks from 35.2 weeks in April. The index peaked in December 2022, at 42.2 weeks, when average monthly payments hit $795.

New-vehicle affordability was better than a year ago even though prices were 1.2% higher because interest rates in May were lower and incomes were higher. Incentives were also 5.5% higher than a year ago, at 7.1% of average transaction price. The estimated number of weeks of median income needed to purchase the average new vehicle in May was down 3.3% from a year earlier.

Click here for the full methodology for the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.

The next update of the Cox Automotive/Moody’s Analytics Vehicle Affordability Index will be published on July 16, 2026.

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¹ The index input of the average interest rate paid by consumers is calculated to reflect a 72-month, fixed-rate loan. For the latest Dealertrack estimated volume-weighted average new loan rate, visit the Auto Market Snapshot.

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The Cox Automotive/Moody’s Analytics Vehicle Affordability Index (VAI) is updated monthly using the latest data from government and industry sources, including key pricing data from Kelley Blue Book, a Cox Automotive brand. This important industry measure will be released at mid-month to indicate if the prices paid for new vehicles are moving out of consumers’ financial reach or becoming more affordable over time.