Average US Family Can't Afford a New Car: Report
We all know the economy is struggling; the stock market may be up but many Americans are still toughing it out, so it’s no surprise that a lot of people are unable to afford new vehicles.
Reportedly the average price of a new car or truck sold in the U.S. last year was just about $32,000. This figure shouldn’t be all that surprising; new vehicles are expensive. What’s a bit shocking though is that median-income families in just one American city can actually afford to pay that much for a new ride.
Only in Washington D.C. can middle-income folks handle the average purchase price of a new vehicle. At the opposite end of the spectrum residents of Tampa, Florida can only afford to spend about $14,200 on a new car or truck. Of course things like taxes and insurance factor into these prices as well, but the overall conclusion is that most Americans are spending far more than they should.
SEE ALSO: Shop for a New Car or Truck
The delta in median-family income is substantial and quite surprising. Families in D.C. bring in about $88,233 per year but the less fortunate folks of Tampa have to make do with about half that much ($44,402). This data comes from the 2014 Car Affordability Study. Not surprisingly the report also indicates that many Americans aren’t saving enough.
How can you avoid the pitfalls of a new-vehicle purchase? Well, experts recommend a 20/4/10 approach. Smart shoppers will aim to make a down payment of at least 20 percent of the purchase price of a vehicle; easing the sting that figure also includes the value of a trade-in, if applicable. Additionally they’ll finance the car for no more than four years (long-term interest rates can cost you thousands). And finally savvy buyers do not allow the monthly payment for a vehicle (including principal, interest and insurance) to exceed 10 percent of their gross income. These are smart suggestions we could all benefit from.
Of course another way to cut the cost of driving is to pick up a used vehicle. Many manufacturers have certified pre-owned programs that offer quality second-hand models with generous warranties. Going this route can save you thousands.
[Source: Interest.com]
Born and raised in metro Detroit, Craig was steeped in mechanics from childhood. He feels as much at home with a wrench or welding gun in his hand as he does behind the wheel or in front of a camera. Putting his Bachelor's Degree in Journalism to good use, he's always pumping out videos, reviews, and features for AutoGuide.com. When the workday is over, he can be found out driving his fully restored 1936 Ford V8 sedan. Craig has covered the automotive industry full time for more than 10 years and is a member of the Automotive Press Association (APA) and Midwest Automotive Media Association (MAMA).
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This does not surprise me. The average price of a new vehicle in the U.S. is $32,086. The average yearly salary in the US is also probably around that number. Buying a car that costs as much as you make in a year (before taxes) is borderline insane! That's like if an elementary school teacher were to drive a new Benz or if your average secretary pulled up to the office everyday in a new Escalade. It doesn't make sense! Americans need to be smarter with their money! Take myself for example - I do not consider myself rich by any means. I earn $90,000 per year (at age 48). I drive a 2004 Toyota Camry that I paid in full for (cash). It's probably worth about 8k. I fill it up once every three weeks for around $25 (with the help of GasBuddy). I insure it for $25/month (from Insurance Panda). I do all maintenance and stuff myself. I simply cannot fathom buying a car that costs as much as I make in a year!
I'm not surprised either. What really shocks me, however, is how people buy these luxury cars, like Mercedes. How the hell can you afford car payments that are over $1,000 a month.