Study: Many Average U.S. Households Can't Afford a New Car

CanYouAffordNewCar

Do you live in one of the largest metropolitan areas in the U.S.? If so, there's a decent chance you can't afford a new car, according to a report by Interest.com, a consumer financial information website. It concludes that out of the nation's 25 largest metro areas, a median-income household can only afford an average-priced new vehicle in just one of them: Washington, D.C. The analysis considered three key factors: a 20% down payment; financing for no longer than four years; and principal, interest and insurance totaling no more than 10% of a household's gross income.

"What this research indicates, more than anything, is that a lot of Americans are spending too much money on their cars," said Mike Sante, Interest.com managing editor, in a news release. "Car costs are one of the most controllable parts of a household's budget. … You're better off driving something more affordable and saving or investing the difference."

Assuming an average purchase price of $30,550 and a monthly payment of $601, the median income of our nation's capital afforded its residents a $628 monthly payment. San Francisco and Boston came closer than most, but still fell short with $537 and $507, respectively.

The three largest U.S. cities — New York, Los Angeles and Chicago — hovered near the middle, with denizens of each able to afford a roughly $21,000 car and monthly payments in the low-$400s. Detroit, Miami and Tampa residents ranked at the bottom of the list as least able to afford cars, only able to accommodate an average monthly payment of between $282 and $332.

Check out the list below to see where your city ranks, followed by its average affordable purchase price and monthly payment:

25. Tampa: $14,516, $282
24. Miami: $15,188, $295
23. Detroit: $17,093, $332
22. San Antonio: $17,137, $334
21. Phoenix: $17,243, $348
20. Pittsburgh: $17,298, $340
19. St. Louis: $18,550, $371
18. Atlanta: $19,122, $376
17. Milwaukee: $19,297, $373
16. Houston: $19,811, $386
15. Dallas: $19,959, $389
14. Sacramento: $19,965, $397
13. Los Angeles: $20,385, $410
12. Chicago: $20,616, $417
11. Philadelphia: $21,069, $419
10. New York City: $21,464, $431
9. San Diego: $21,781, $433
8. Denver: $21,835, $432
7. Portland, Ore.: $21,985, $397
6. Seattle: $22,963, $466
5. Minneapolis: $24,042, $470
4. Baltimore: $24,079, $468
3. Boston: $26,025, $507
2. San Francisco: $26,786, $537
1. Washington, D.C.: $31,940, $628

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By Matt Schmitz | February 27, 2013 | Comments (23)

Comments 

dt

Yeah, no kidding. Newest car I've ever owned was six or seven years old. I have no idea how my coworkers go around in $20,000 cars.

Marcus

60 month and 72 month financing can change that greatly though.

Soakee

The notion of a 20% down-payment is largely a myth. Too many buyers trade out with negative equity. Long-term loans of 60-72-84 month terms only work if you plan to keep the car longer than the loan.

Andrey

This study is mostly worthless without taking into account cost of living in each city. Yes you can live beyond/below your means, but I bet DC (among others) would be considerably lower on that list once cost of living is taken into account.

Tony

no wonder. 49 million Americans supplementing on food stamps. I tell you even more. there are more then 10 indicators that America is third world country already. No wonder, people can't afford cars. But the problem is largely people themselves. Americans go "Big". They buy cars loaded with features and baby them and spoil themselves. "I deserve", they say. You people deserve nothing. You put yourself in debt and them eat on food stamps. If in India people can't afford, they make $2K car. Here manufacturers are spoiled. But it is people who just opens their valets. close your valets and manufacturers will offer cheaper cars. Just a year ago my bro bought SE Accord under $20K, today Accord starts @ 23+. They load it and charge $$$ for it. simple - don't buy. Drive your car to the ground.

Alfonso Kelly

There is nothing wrong with buying a new car as long as you are responsible. 60 month financing is great as long as you are not getting hit with a large interest rate. Gross Income is $5000 Take this for example: $25,000 total vehicle purchase price with 20% Cash down payment or trade In, financing at 60 months for a competitive 3.5% APR = $391.66 with full coverage insurance at no more than $108.34 a month equals $500 a month for car expenses.

Ididn'tVOTE4thePUTZ

You mean the Obama-economy isn't working!? Say it ain't so! Just wait until all the youngens have no job and the gov starts fining them for having no healthcare. Trust me at that point buying a new car will be the least of your thoughts.

Tony

forget about those with no jobs. Those with jobs will be beat to death with paying taxes and premiums. In the end, companies will stop giving benefits and you will go to your health exchange, paying 20K a year for Obamacare. there goes your car.

Dan

This is what happens when you spend 30 years giving all the money to a handful of ultra-wealthy and hope for some sort of voodoo "trickle down".
How're people going to buy all the stuff your company makes when you took all their money?

jyd

Those who voted for Obama, twice, are finally waking up to the fact that he is a failed president. His policies have not only damaged our economy for the past four years but will continue to damage even after he leaves.

Shorebreak

Since when has affordability stopped most people from buying a vehicle? Experian Automotive said that 42 percent of new and used car loans written in the third quarter of 2012 went to subprime buyers. In Texas new pick-up trucks costing $30-50k are commonplace in every neighborhood. Negative equity when trading-in is no big deal, just add it in to the payments on the next new truck. Even if you have no credit, just go see one of your local 'buy here, pay here' dealerships and buy a used truck with high miles for $150/week. Drive it six months and let it get repo-ed. No problem, this is America, regardless who is President.

area man

I can't afford the car I have.And with gas hitting 4.00$ I drive only to work.

Kj

I haven't purchased a new car in 10 years only because used cars are reliable and many have great warranties. My latest car purchase...a 2011 Subaru...has a monthly payment of only $116 for 5 years. Would I have preferred a totally new car? Maybe, but why buy one and watch it depreciate in value as I drive it off the sales lot.

Tony

Kj you better sell you Subaru before it is too late. By the time you finish payments it will need gaskets and this is an expensive job thanks to boxer engine.

Ugi

I voted for Obama the first time but thankfully not the second. He's proving to be the most disappointing President in our history. Who can buy a new car when every day staples are so expensive. I remember when he railed against the Republicans about the high prices of gas. He's such a lousy hypocritical political thug. Thankfully if Hillary runs and gets elected she can likely clean up his mess. Maybe then I'll be able to buy a new car. Four years later and economic growth is a lousy 0.1%!!!

Jose

Why buy new? A car is a tool, not a status symbol. A $3K used civic will likely work another 6 or 7 years without major repairs, get over 30mpg and make it so it is never a savings to buy new.

Greg

And with the recent tax increases and the "Affordable" Health Care Act taxes, I may never be able to own a new car again!

Des Alba

A lot of people, including older people, have trouble scraping the money together to buy a new car.

But people with money will have no problem keeping it together. The middle class with money, however, is shrinking rapidly.

And even if you make enough money to buy a new car, will you be able to afford the insurance on it?

This article is right on.

Denise

i have never owned a new car and can't afford one but there are plenty in my neighborhood. so not sure where this study took place and i hope my taxpayer dollar wasn't wasted on it.

Steve

Once a new car's floor mats get dirtied up, it becomes an old car to me. I just buy new floormats once a year and wash the hood/ windshield and think about all my savings. Except for styling, my current car gets actually same/better MPG's than a newer model. (Shh....don't tell anyone its a Camry). Seriously in this economy, people are justified in worrying about other stuff like, food and jobs and gas prices to keep their family going strong.

Robster

A brand-new compact Dacia Logan costs $5,000 in Morocco. Of course, it has no safety or convenience equipment. The reason cars are so expensive here and now is because they are so good. There is no demand for cheaper cars because used cars are so dependable.

sarahsmile90

Interesting how the high cost of cars is being blamed on President Obama? Seriously people, we are in a much better place then we were at the end of the Bush administration....especially us Detroiters!
But back to the car issue, I see nothing wrong with those that can buy new and those that buy used. Buy what you can afford and don't bury yourself with car payments.

Jon

Buying a new car is for suckers. If u buy a used car for say $14400 car for 24 months it cost $600 which the article states was what was needed for the new car payment.
Once done rest of time is free.
I bought a one year old mustang for $19000
New $32000. Thankfully six years later still running fine .

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