New Cars Unaffordable in All Major U.S. Cities

NEW YORK, June 30, 2016 -- A median-income household cannot afford the average-priced new car or light truck in any of the 50 largest cities in the U.S., according to research released today by Bankrate.com . Bankrate.com's full list of how much a median-income household in each of the surveyed cities can afford to spend on a vehicle can be found here:

"People are spending far too much money on their cars," said Steve Pounds, personal finance analyst at Bankrate.com. "There are many safe, affordable and stylish options on the market for people to choose from that won't cut into more important budget items; such as college funds and retirement savings."

When calculating how much a household can afford to spend on a car or light truck, Bankrate.com 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.

Bankrate.com 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 2016 was $33,865, according to Kelley Blue Book.

Cities that ranked high for car affordability:

The bottom 10 cities (starting with the lowest) in terms of car affordability:

Methodology:
For each of the 50 most populous cities in the U.S., Bankrate.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).

Sources:
Median income data was gathered from the U.S. Census Bureau's 2014 "American Community Survey."

Insurance costs are 2013 statewide averages from the National Association of Insurance Commissioners.

Kelley Blue Book provided the average cost for new vehicles in April 2016.

Sales tax rates were obtained from local governments.

The average interest rates on a 48-month new car loan came from Bankrate's weekly survey of major lenders. (Do we have a date for when it was pulled?)

About Bankrate.com
Bankrate.com provides consumers with the expert advice and tools needed to succeed throughout life's financial journey. For over two decades, Bankrate.com has been a leading personal finance destination.  The company offers award-winning editorial content, competitive rate information, and calculators and tools across multiple categories, including mortgages, deposits, credit cards, retirement, automobile loans, and taxes. Bankrate aggregates rate information from over 4,800 institutions on more than 300 financial products. With coverage of over 600 local markets, Bankrate generates rate tables in all 50 U.S. states. Bankrate develops and provides web services to more than 100 cobranded websites with online partners, including some of the most trusted and frequently visited personal finance sites on the internet, such as Yahoo!, CNBC, Investopedia and MarketWatch.  In addition, Bankrate licenses editorial content to more than 500 newspapers on a daily basis including The Wall Street Journal, USA Today, The New York Times and The Los Angeles Times.