Average Car Price Affordable Only To Washington, DC Customers
Unlike the average Beltway insider, a report by Interest.com claims the majority of medium-income American households in 24 of 25 cities studied cannot afford the average new-car price of $32,086.
AOL Autos reports the study focused on each city’s median income in relation to the new-car price average as pegged by Kelley Blue Book. Said price was broken down to monthly payments of $633 per month for 48 months with 20 percent down while interest, insurance and principal exceeded no more than 10 percent of the household’s gross income.
The only city out of 25 to pull off the feat? Washington, D.C., whose residents can afford the average of $32,531 on a new car, broken down to 48 monthly payments of $641. San Francisco and Boston trailed the nation’s capital, while everyone else in the remaining cities were paying too much for their new car, according to Interest.com managing editor Mike Sante:
Too many families are spending way too much on new cars and trucks. Just because you can manage the monthly payment doesn’t mean you should let a $30,000 or $40,000 ride gobble up such a huge share of your paycheck.
Experts recommend spending up 20 percent of take-home pay on a vehicle purchase and subsequent payments.
Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.
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Am I the only person with a statistics background that is bothered by the words "average" when talking about new car prices, and "median" when talking about incomes? They are apples to oranges. The median income is based on lining all the items up by whatever you are measuring them by and picking the one in the middle. The average is when you add all the items up and divide by the total quantity. They can be very different. Generally, medians of products and incomes are considerably lower than averages because there are a fewer high priced items that skew the average. Based on this, one would expect the average car to be too expensive for the median income. One would also expect the average income to easily be able to afford the median car. I'd like to know what the median car price was. That is the price of all cars sold, lined up by price and pick the middle one.
P.S. It is my experience that people greatly underestimate the real cost of owning and driving a car. They fail to add up depreciation + gas + maintenance + insurance + taxes + yearly registration and inspection fees + accident costs. There are probably other less hard costs like time lost driving that could be used for working or leisure.
http://online.wsj.com/public/resources/documents/SUN_-A001.pdf
The people buying the 30-40k car make more than average in this area verses the rest of the country. The cost of living is so high that if you make 130k a year salary your spending most of it on your housing. So your car purchase comfort zone is at that 30-40k range. Other places in this county you would be stepping up to to the 40-50k range of car. So selling at the 30-40k range isn't hard as it hits the income/cost of living sweet spot. Being an engineer for a general contractor here I agree, the economy didn't get hit as hard, hence why I live here. But it is the government contractors(mostly to the military) and lobbyists that make the big money. Not the government employees. My 2300sqft house that still has the original 1953 windows and kitchen cabinets cost me $650k and was a screaming good deal in my neighborhood. So the average GS 12/13 while making a good salary is not enough to own a home with out income from a spouse. Then facted with buying a car the choice price point is 30-40 for a purchase, otherwise you lease. On my street all the nice cars, 5 series, 3 series, Tahoe's are leases. The camrys and accords are purchased.