Study Says Many Americans Can No Longer Afford To Purchase A New Vehicle

According to Bankrate’s latest Car Affordability Study, the average American living in a large city doesn’t earn enough to purchase a new vehicle.

The study looked at a variety of different factors including vehicle pricing data, monthly insurance costs, local sales taxes, and household incomes in 25 cities in the United States.

The study also used the so-called “20/4/10” rule which states buyers should “put down at least 20 percent of a vehicle’s purchase price, take out a car loan for no longer than four years, and devote no more than 10 percent of your annual income to car payments, interest, and insurance.”

According to the results of the study, Washington D.C., San Francisco, and Boston are the three cities in the United States where residents are most likely to be able to afford a new vehicle. Likewise, the cities of Miami, Detroit, and Tampa-St. Petersburg were the places where car ownership was most likely to be out of reach for a majority of people.

Even though used car prices are dropping, the study found people living in the eight of the 25 cities would have trouble buying at vehicle at the current average used-car price of around $19,200.

The news is somewhat surprising but Autotrader senior analyst Michelle Krebs explained “In the past 35 years, the cost of a new car has gone up 35 percent, a used car is up 25 percent, and at the same time, the median household income is only up 3 percent.”

The study says the affordability issue is pushing consumers to flock towards longer term loans. As we reported earlier this month, the number of new car loans between 73 and 84 months has shot up from 11.7 percent in early 2009 to 33.8 percent this year.

  • john1168

    Not suprising at all. With all the new tech and safety features and better (more complex) styling, prices got pushed up significantly over the past 10 to 15 years and with the majority of peoples salaries not really increasing proportionally over the same period of time, not many people can buy new and we’ll see more loans and unfortunately more defaults on loans. 15 years ago you could get a fairly loaded economy car for under $15k. Now in some cases a fairly loaded economy car might be in the mid $20k’s and even approaching $30k. oh, and then there’s tax. Of course if you can pass on some of the options and work a deal with the dealer prices for an economy car become a bit more affordable. And this is just economy cars. Of course prices have always gone up over the years but if salaries don’t increase at least with the cost of living well….

    • Jason Miller

      Yep, same old story. Costs keep going up, salaries not so much.

    • Obsequious Lickspittle

      And for many people, it’s okay to hide behind the Well, I can afford $200 a month no problem!
      What’s the cost again? No matter, no mind.

    • Pete Moss

      1. Your (American I am assuming) economy is being consumed by the medical for profit and participant prescription drug gouging and savaged by medical litigation’s associated costs.

      2. You just went through 8 years of reasonable recovery of an inherited recession even with the constant obstruction from the GOP.

      3. Now you elect a giant egotistical scumbag misogamist, senile, lying, reality show actor who has no skill at anything that is honest, legal, moral, or compassionate, who has made and lost millions from an inheritance. For every dollar he made someone else lost five dollars.

      Your country exploits the middle class and it’s going to get worse.

  • Research Janitor

    This can’t be true, we just finished 8 years of Hope and Change…

  • kachuks

    First we couldn’t afford houses, now we can’t afford cars.

  • getoffme

    “Fake news” – Trump

    • brian

      Always got to add politics crap

  • Bob White

    In another 3.5 years, the transition to 3rd World America will be complete.

  • Justin Spencer

    The 20/4/10 rule seems a little out of touch with with the average American buyer. I don’t think I know anybody that puts 20% down and finances a new car for 4 years unless they have uber bucks to spend. I mean you can’t even get into a run of the mill compact Toyota Corolla LE these days without spending well over $20,000….and that’s a “people’s car”!!! I’ve never put more than 5% down if anything at all and I usually do a 6 year term….then I either pay it off early or trade it in. People can still afford new cars but they spend the least amount of money possible upfront and monthly to do it!