Average new car is affordable only in the Washington, DC area

Average new car is affordable only in the Washington, DC area

When Bankrate looked at the 25 largest metro areas in the U.S., researchers found that the average new vehicle can be considered affordable in only one Metro Washington, DC.

They used the 20/4/10 rule, which says a buyer should aim to put down at least 20 percent of a vehicleês purchase price, take out a loan no longer than four years, and devote no more than 10 percent of annual income to car payments, interest and insurance. As dealers know, that rule is broken every day, even in the Washington area.

The studyês authors used insurance data, local sales tax data, and data on population and household income to calculate each cityês affordable price after taxes and insurance costs. In the Washington area the affordable price before taxes is $37,223.41, and the margin between the affordable price and the average price is 11.9 percent. In the other 24 cities, that margin is negative. In Baltimore, itês -20.76 percent, in New York itês -32.71 percent, and in Miami (last place) itês -59.18 percent.

–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 is only up 3 percent,” said Michelle Krebs, a senior analyst for Autotrader.