Shopping for a car didn’t get any easier in July. Cox Automotive reports that new vehicle prices are still at a record high, with the continuing computer chip shortage limiting selection.
Used car inventories are back to normal, but prices are still rising. On top of that, auto loan interest rates are rising. It all adds up to worsening vehicle affordability.
In July, the average vehicle transaction price (ATP) was over $48,000, setting a new record, according to Kelley Blue Book. July’s ATP rose by 0.3% from June and 11.9% from July 2021.
Better compared to last year
One factor keeping prices elevated was the lack of cars and trucks on dealer lots. Inventory levels were higher than in July 2021, but well off pre-pandemic norms. The total supply of available unsold new vehicles was about 1.09 million units at the end of July, up 2%, or about 20,000 units, from the year before.
“This marks the first time in 2022 that the new-vehicle supply has been higher compared with the same week last year,” said Charlie Chesbrough, Cox Automotive’s senior economist. “But this is not due to a big jump in inventory recently, but rather an indication of how bad it was last year. Overall, new-vehicle inventory remains essentially unchanged from what it has been, and production is not catching up to demand yet.”
The selection was a little better on used car lots. Used vehicle inventory held steady from June to July, while sales and prices registered an uptick by month’s end, according to a Cox Automotive analysis of Auto Available Inventory data.
The average used car list price was $28,219 in July, in part because demand was higher. At the end of June, dealers had a 52-day supply of cars on hand. By the end of last month, that number had fallen to 49.
Harder to get loans
Car buyers’ access to credit declined across the board in July, according to the Dealertrack Auto Credit Availability Index for all types of auto loans. Simply put, it was harder to get an auto loan last month than it was in June.
Cox analysts said credit availability factors mostly moved against consumers in July. The average auto loan rate increased by 26 basis points – not a huge move but big enough to disqualify some car shoppers or require a larger down payment.
When you add it all up, it means fewer consumers could afford to buy the car that they wanted last month. Increases in interest rates and new-vehicle prices combined to reach a record high, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.
The number of median weeks of income needed to buy the average new car or truck in July increased to 42.2 weeks from a downwardly revised 42.0 weeks in June.