TriShield

New Cars Increasingly Out of Reach for Americans



By Paul A. Eisenstein, NBC News | CNBC – Wed, Feb 27, 2013

Looking to buy a new car, truck or crossover? You may find it more difficult to stretch the household budget than you expected, according to a new study that finds median-income families in only one major U.S. city actually can afford the typical new vehicle.

The typical new vehicle is now more expensive than ever, averaging $30,500 in 2012, according to TrueCar.com data, and heading up again as makers curb the incentives that helped make their products more affordable during the recession when they were desperate for sales.

According to the 2013 Car Affordability Study by Interest.com, only in Washington could the typical household swing the payments, the median income there running $86,680 a year. At the other extreme, Tampa, Fla., was at the bottom of the 25 large cities included in the study, with a median household income of $43,832.

The study looked at a variety of household expenses, such as food and housing, and when it comes to purchasing a new vehicle, it considered more than just the basic purchase price, down payment and monthly note, factoring in such essentials as taxes and insurance.

Bottom line? A buyer in the capital can purchase a car with a sticker price of $31,940, slightly more than the new vehicle average for the 2013 model year and about what it would cost for a mid-range Ford Fusion sedan or a stripped-down BMW X1 crossover. The buyer in Tampa? They'll just barely cover the cost of a basic Kia Rio, with $14,516 to spend.

"If you live in New York City or San Francisco, you're probably going to have to pay a lot for housing, but you don't have to pay a lot for a car," said Mike Sante, the managing editor of Interest.com, a financial decision-making website.

Affordability has been a matter of growing concern for the auto industry in recent years as prices have continued to move upward. Even the most basic of today's cars are generally loaded with features that were once found on high-line models a few decades back - if they were available at all - such as air conditioning, power windows, airbags and electronic stability control, as well as digital infotainment systems. They also have to meet ever tougher federal safety, emissions and mileage standards that have added thousands to the typical price tag.

"The average compact car of today has the features of a midsize model somebody might be trading in - but it may be just as expensive," said David Sargent, director of automotive operations for J.D. Power and Associates.
That is one reason why many buyers have been downsizing in recent years, said Bill Fay, general manager of Toyota, though he added that "there is still a lot of affordability in the marketplace."

Perhaps, but industry planners have come to recognize that they are targeting a much smaller segment of the American public than in decades past. That's one reason why most manufacturers are offering more downsized models.

They also are working with their dealers to offer certified pre-owned programs where buyers can stretch their budget by purchasing a two- or three-year-old vehicle that has gone through an extensive inspection and, if necessary, repairs and replacements. Such vehicles may cost slightly more than a conventional used model but usually include a like-new warranty.

While the typical new vehicle will likely nudge up this year, Interest.com editor Sante stressed that 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."

If the typical new car costs $30,550, with an average monthly payment of $550, the five cities most able to meet - or come close - are:

1) Washington
Average Household Income: $86,680
Affordable Purchase Price: $31,940
Maximum monthly payment: $628
2) San Francisco
Average Household Income: $71,975
Affordable Purchase Price: $26,786
Maximum monthly payment: $537
3) Boston
Average Household Income: $69.455
Affordable Purchase Price: $26,025
Maximum monthly payment: $507
4) Baltimore
Average Household Income: $65,463
Affordable Purchase Price: $24,079
Maximum monthly payment: $468
5) Minneapolis
Average Household Income: $63,352
Affordable Purchase Price: $24,042
Maximum monthly payment: $470

At the other end of the scale, those five cities least able to handle a car payment are:

21) Phoenix
Average Household Income: $50,058
Affordable Purchase Price: $17,243
Maximum monthly payment: $348
22) San Antonio
Average Household Income: $48,699
Affordable Purchase Price: $17,137
Maximum monthly payment: $334
23) Detroit
Average Household Income: $48,968
Affordable Purchase Price: $17,093
Maximum monthly payment: $332
24) Miami
Average Household Income: $45,407
Affordable Purchase Price: $15,188
Maximum monthly payment: $295
25) Tampa
Average Household Income: $43,832
Affordable Purchase Price: $14,516
Maximum monthly payment: $282

http://finance.yahoo.com/news/cars-i...145957880.html

2002_Z28_Six_Speed

iTrader: (19)

This is true. But of course dealers and banks don't turn people away like they should. If you are only putting 3K-5K down on a car then you can't afford it. 25% should be the min down payment.

We are partly to blame for the rising prices of new cars, though. If we don't buy what we can't afford then manufacturers will find a way to make the cars more economically or cut out overhead.

We as a society will have to learn to live with less all the global population increases and the pieces of the pie become smaller.

fspeedster

iTrader: (6)

^^That or only a few people have most of the pie..

gocartone

iTrader: (4)

What they hell did they do to come up with those numbers?? At $87000, you would be taking in roughly $60k after taxes (FUUUUUUU TAXES!!!). That comes out to $5k a month, after taxes. Take out the $630 they say you can spend (they are assuming 0% down, I doubt anyone making $87k a year is not going to put money down), and there's still $4370. Where is all that money going? Owning a $500k house would only cost you $3k of whats left, leaving roughly $1400 for food and entertainment every month.

As for the increase in price of cars, blame people for wanting as much useless **** in a car as possible, and the Government for constantly making new laws regarding safety, emissions, and fuel consumption.

2002_Z28_Six_Speed

iTrader: (19)

Funny you should say that.
Someone msg me this video just the other day!





Well worth the watch for anyone.



That would be way over budget on the car and house for me.
Considering that the person doesn't have kids -- most people do.

That only leaves you 1400 for food, gas, heating, projects, emergency funds, clothes, and to save for the future.

If I netted 5K a month I would try to have a house payment more around 1400 and a car payment of no more than 400 a month. Of course I live in a part of the country where a decent house can be had for 120K to 150K so I have no right to complain.

Tainted

iTrader: (9)

the government should give us all a $10,000 bailout so we can all afford new cars.

ULTIMATEORANGESS

iTrader: (4)

since we pretty much bailed those ******* out i agree.

ULTIMATEORANGESS

iTrader: (4)

did you get that video from facebook? i think i saw it on the teamsters page.

Z Fury

iTrader: (1)

You're leaving out quite a few expenses, including health insurance, retirement/savings amounts (an $85K salary surely has some investment going on), life insurance, car insurance, etc.

I completely agree with your last paragraph though. 100% truth. I still don't understand why new cars have to have a stereo system that operates like an iPad. I'm sure that won't cause any wrecks...

1CAMWNDR

iTrader: (21)

Student loans...yours, your spouse's or your kid's, are a BIG chunk of that income also. I feel for anyone with more than one kid within 10 years of each other.

Theblacknightls1

iTrader: (1)

Imagine having 3 within 10 yrs apart. That's why my spouse works also !

tjwashow

iTrader: (2)

thats why i loved used cars!

gocartone

iTrader: (4)

Either way, I know a lot of people making $30-40k a year with kids and houses that have no problem buying a $20-30k car. It's 100% a case by case thing, but to say someone making $85k a year can only afford to drop $600 a month on a car loan seems ridiculous to me.

Theblacknightls1

iTrader: (1)

I agree, some people don't know how to save money. Some blow money on fast food etc..

Jon5212

iTrader: (2)

I wouldn't be able to afford a 30K car. I'm in that bracket making approx 40K a year by myself. I have a 4 month old daughter. House payment is 750, insurance on 3 vehicles is approximately 1200 a year. Electric bill/water/ cell phone/ Internet/tv bill. Doesn't leave nearly enough to make 500 a month payment on a car.

Of course I do have plenty of cash in savings that I could go buy that car outright in cash but I believe that is just stupid.

ULTIMATEORANGESS

iTrader: (4)

how much is house where you live?


because theres no way you could afford a mortgage let alone any additional expenses making 30-40k a yr in this area.

gocartone

iTrader: (4)

Depends on what you're comparing it to. $80-100k you can find a nice smaller house, $150k gets you a decent sized nice house, and $200k-350k gets you a big house on a good chunk of land (20-40 acres).



3 bedroom, 3 bath, 2 car attached, 2.5 car detached, 24 x 70 shed & 36 x 22 shed & 40 x 60 pole shed, and it's on 43 acres (in NJ terms, about 20 blocks worth of land) for $300k.

ULTIMATEORANGESS

iTrader: (4)

yeah, much cheaper than here. a ton less expensive.

ss1129

iTrader: (16)

Not to turn this political, but part of the problem is once again...the government. They mandate things and $$$ goes up.

6 airbags....price goes up.
Wheel pressure sensors....price goes up.
Rearview cameras...(coming soon)
abs....price goes up.
RND for better gas milege.....price goes up.

Its not like the manufacturers are going to say "well its in the customers best intrest, we will eat the cost of these".

gocartone

iTrader: (4)

Don't forget traction control AND stability control are now mandated. Soon to come are collision avoidance systems and warnings (vibrations when leaving a lane, automatically applying the brakes when about to rear end someone, etc).

Air bags, seat belts, and making cars that allow you to walk away from a crash are all that should be mandated. If you can't drive a ******* car without traction control, stability control, tire pressure sensors, etc, you shouldn't have your goddamn license! Pretty soon it's going to be government mandated that everyone can only use one of those Google cars that drives itself