Cox Automotive Moody's Analytics Vehicle Affordability Index

This document is a technical report introducing the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. The index quantifies price movements in the new-vehicle market relative to U.S. consumer spending power, specifically detailing the number of weeks of median household income required to purchase an average new vehicle. The report outlines the methodology used to develop the index, which incorporates consumer vehicle transaction prices, median household income, and interest rates on vehicle loans. It explains the rationale behind using median household income over median family income and discusses the significance of financing terms and down payment assumptions. The report also presents initial insights derived from the index, noting trends in vehicle affordability over time, particularly during periods of rising transaction prices. The index aims to provide a clear metric for assessing vehicle affordability, assisting both industry experts and consumers in understanding market dynamics.