CARS.COM — Please understand how awkward this is for us, being in the business we’re in and all. But just the same, we feel compelled to report to you the results from a new study on car costs versus median income in the nation’s 50 largest cities and the bottom line is (gulp)… you probably can’t afford your car.
We know, we thought the same thing. But according to personal finance website Bankrate.com, car buyers in the nation’s major metros aren’t adhering to an important budgeting rule of thumb: the “20/4/10” rule. When buying a car, Bankrate said, you should have a down payment of at least 20 percent, financing lasting no longer than four years, and a principal, interest and insurance total not exceeding 10 percent of your gross household income.
Well, it’s a fine time to get this kind of feedback, huh? The average price of a new vehicle in 2016 is pushing $34,000. Meanwhile, the average length of a car loan has stretched to nearly six years, with nearly a third of loans in the first quarter of 2015 lasting 73 to 84 months.
“People are spending far too much money on their cars,” Bankrate analyst Steve Pounds said. “There are many safe, affordable 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.”
Using the median household income for each of the 50 largest cities in the U.S., Bankrate calculated the maximum amount people are able to spend on their monthly car payment as well as the total price of a car. While some cities fared better than others overall, none reached the $34,000 average price of a new vehicle.
San Jose, Calif., came closest, with an affordable purchase price of $32,856. Despite its Motor City moniker, Detroit’s residents are least able to afford their cars, with a recommended purchase price of just $6,174. Is your city among the least or most able to afford their cars? Find out below.
The top 10 cities least able to afford their cars, followed by their recommended monthly payment and total purchase price, are:
10. Providence, R.I.; $223 per month; $11,297 total purchase price
9. Cincinnati; $217; $11,017
8. Birmingham, Ala.; $183; $9,823
7. New Orleans; $200; $9,812
6. Miami; $171; $8,646
5. Buffalo, N.Y.; $168; $8,319
4. Hartford, Conn.; $156; $7,960
3. Cleveland; $151; $7,558
2. Rochester, N.Y.; $148; $7,392
1. Detroit; $120; $6,174
On the other end of the spending spectrum, the top 10 cities most able to afford their cars are:
10. Boston; $390; $21,484
9. Raleigh, N.C.; $394; $20,901
8. Austin, Texas; $413; $21,083
7. Portland, Ore.; $390; $21,484
6. Charlotte, N.C.; $408; $21,655
5. San Diego; $500; $25,033
4. Washington, D.C.; $498; $25,237
3. Seattle; $522; $25,660
2. San Francisco; $644; $31,970
1. San Jose, Calif.; $662; $32,856