New Cars Unaffordable in All But One Major Metro Area
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"Too many families are spending way too much on new cars and trucks," said
Interest.com recommends that median-income households spend no more than the following amounts on vehicle payments (principal and interest). For comparative purposes, the average price of a new car or light truck in 2013 was
Metro Area |
Affordable Purchase Price |
Maximum Monthly Payment |
1. Washington, D.C. |
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2. San Francisco |
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3. Boston |
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4. Minneapolis |
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5. Baltimore |
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6. Seattle |
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7. |
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8. Denver |
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9. San Diego |
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10. New York City |
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11. Philadelphia |
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12. Chicago |
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13. Dallas |
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14. Los Angeles |
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15. Sacramento |
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16. Houston |
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17. Milwaukee |
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18. Atlanta |
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19. St. Louis |
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20. San Antonio |
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21. Phoenix |
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22. Pittsburgh |
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23. Detroit |
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24. Miami |
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25. Tampa |
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When calculating how much a household can afford to spend on a car or light truck, Interest.com considered three key factors that are commonly referred to as the "20/4/10" rule: a down payment of at least 20%; financing lasting no longer than four years; and principal, interest and insurance not exceeding 10% of a household's gross income.
More information is available at:
http://www.interest.com/car-buying/news/build-financial-security-affordable-car-truck/
Methodology:
For each metro area, Interest.com calculated 10% of the monthly median gross household income in that area and subtracted the average monthly insurance premium in that area to determine the maximum amount that the median-income household should spend on monthly car payments (principal and interest).
Interest.com used its Auto Loan Calculator to calculate how much the median-income household can afford to borrow. Assumptions: 20% down payment, 48-month loan, national average interest rate, roll the sales tax into the amount being financed. The calculator is available at:
http://www.interest.com/auto/calculators/auto-loan-calculator/
Sources:
Median incomes for each metro area came from the
Insurance costs are 2011 statewide averages from the
Average 48-month new car loan rates are according to Bankrate.com (
Sales tax rates were obtained from local governments and car dealers.
About Interest.com:
Since it was created in 1994, Interest.com has been helping consumers make smart financial decisions. Interest.com's stories, calculators and interest rate tables also appear on the websites of more than 100 newspapers in 31 states, including the
Interest.com is owned by Bankrate, Inc., which is among the largest and most trusted providers of personal finance advice and information on the Web.
For More Information:
[email protected]
917-368-8635
SOURCE Interest.com
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