Median-Income Household Can Only Afford Average-Priced New Car in One of the 25 Largest U.S. Metros

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CHICAGO--Feb. 26, 2013:  A median-income household can only afford the average-priced new car or light truck in one of the 25 largest metropolitan areas in the U.S. (Washington, D.C.), according to research released today by, a Bankrate company. published a related list of how much a median-income household in each metro area can afford to spend on a vehicle.

"What this research indicates, more than anything, is that a lot of Americans are spending too much money on their cars," said Mike Sante, managing editor of "Car costs are one of the most controllable parts of a household's budget. For example, 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. You're better off driving something more affordable and saving or investing the difference."

When calculating how much a household can afford to spend on a car or light truck, considered three key factors that are commonly referred to as the "20/4/10" rule. That is: 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. recommends that median-income households spend no more than the following amounts on vehicle payments (principal and interest) in total and each month. For comparative purposes, the average price of a new car or light truck in 2012 was $30,550, according to TrueCar. That equates to a monthly payment of approximately $601.

Metro  Area         

Affordable Purchase Price   

Maximum Monthly Payment

1.  Washington, D.C.   



2.   San Francisco         



3.   Boston                     



4.   Baltimore                



5.   Minneapolis                 



6.   Seattle                   



7.   Portland, Ore.       



8.   Denver                   



9.   San Diego               



10. New York City           



11. Philadelphia             



12. Chicago                    



13. Los Angeles            



14. Sacramento          



15. Dallas



16. Houston                   



17. Milwaukee                         



18. Atlanta                      



19. St. Louis                



20. Pittsburgh                 



21. Phoenix             



22. San Antonio          



23. Detroit            



24. Miami          



25. Tampa                   



More information is available at:

Car Prices Outpace Median Income

For each metro area, 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). 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:

Auto Loan Calculator

Median incomes for each metro area were pulled from the U.S. Census Bureau's 2011 "American Community Survey" (the latest year for which data is available).

Insurance costs are 2010 statewide averages from the National Association of Insurance Commissioners (the latest year for which data is available).

TrueCar provided the average national cost for new cars or light trucks in 2012.

The average rate for a 48-month new car loan came from (January 23, 2013).

Sales tax rates were obtained from local governments and car dealers.

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