New Cars Increasingly Out of Reach for Many Americans
http://finance.yahoo.com/news/cars-increasingly-reach-many-americans-145957880.html
By Paul A. Eisenstein, February 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