Posted on 07/21/2017 9:06:34 AM PDT by Lorianne
Some people say capitalism and alligators have much in common — both eat their young. While the rich get richer (and will get richer still if the #FakePresident has his way), ordinary schlubs who are working one, two, or sometimes three jobs to make ends meet are finding they can no longer afford to buy average new cars.
That’s according to a new study by Bankrate.com. It finds that people living in 24 of the 25 largest metropolitan areas in the US cannot afford the average price of new cars, which was $33,000 in May according to Kelly Blue Book. In six of those cities, people struggle to afford cars cost half that much.
Only in Washington, DC, where the median income is over $100,000, are people able to afford a new car. But the statistics for the nation’s capitol are wildly skewed by all the millionaires in Congress and the $1,000 an hour lobbyists who grease the wheels of democracy.
“Affordability” is a relative term, of course. For purposes of the Bankrate study, analysts used the so-called 20/4/10 rule. It assumes a 20 percent down payment, a 48 month loan, and a total of of insurance and loan payments that does not exceed 10 percent of a family’s gross income.
“The [average] household can’t comfortably afford to buy a new vehicle,” said Claes Bell, a Bankrate.com analyst. “That means a lot of households are overextending themselves on car costs, and that can potentially crowd out other priorities such as saving for retirement.”
“This issue of affordability isn’t just about the price of cars. It’s about the stagnation of wages,” Bell said. “Car costs are not rising all that quickly over time, but things like health care and college costs are going up and wages aren’t [keeping up]. Budgets are being stretched.”
“People should prepare for a car purchase by saving for a down payment,” Bell said. “Sometimes people impulsively go to a car lot and get sold on buying a new car. But if they don’t have a sufficient down payment saved, it will be hard to fit the payment into their budget.”
The total of auto loan indebtedness now stands at $1.2 trillion — about 10% of all consumer debt according to the Federal Reserve. Late payments on car loans is rising. Nearly 4% were delinquent at the end of March according to data compiled by the Federal Reserve Bank of New York.
“People fall in love with cars they can’t afford, and that’s how they get in trouble,” said John Gajkowski, a certified financial planner and co-founder of Money Managers Financial Group.
Capitalism assumes constant growth — a model that is inherently unsustainable. Real wages for workers have been falling slowly but surely in America for 40 years. The cost of living continues its upward climb while globalization forces American workers to compete with the low paid labor in other parts of the world.
Car makers are subsidizing sales with low interest rates and extended term loans. On some high end models, it is now possible to get loans that extend out to 96 months or more. But people seldom keep a car that long, which means they find themselves owing more than their car is worth when it comes time to go car shopping again. It’s a vicious circle that is not likely to end well for manufacturers or consumers.
“Unions have driven the cost of cars up more than anything else.”
You forget ...
Govt dictates in every way have driven up the cost of new cars. Emission, multiple air bags, back up cameras, mileage requirements, and on and on.
There is a wide range of price points in the auto market. I bought a Hyundai Accent for around $14 K. I just commute back and forth from work so it is perfectly fine for me. Unlike housing where location is very important a car is a car and so what if one cannot afford a BMW. My Hyundai gets me to where I need to go exactly the same way as a luxury car.
I just bought my wife a certified 2016 Hyundai Sonata for $14,500 with 37,000 miles from Enterprise. It satisfies her needs of less than 6,000 miles per yr driven.
Sure can’t tell from the bombardment of TV ads you get from car dealers.
“None of this 72 months and no down.”
Back then there was no need for ‘gap insurance’
Today, so many are underwater for the entire life of the car.
I couldn’t get past the hashtag-fake president. Didn’t we dump the fraud in November? Why, yes! We did! Where do they get this stuff?
Right, except that Charger would cost $21,276.49 in today’s dollars. Still quite a bargain though.
“Only in Washington, DC, where the median income is over $100,000, are people able to afford a new car.”
That’s a lie, pure and simple. (The author, not you.)
“I just bought my wife a certified 2016 Hyundai Sonata for $14,500 with 37,000 miles from Enterprise. It satisfies her needs of less than 6,000 miles per yr driven. “
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Good for you.
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I currently drive a 1999 Sienna with 242K that I add coolant to daily and oil (valve cover gasket leak) once a week. Has other issues as well, but I don’t want to spend $2K on it.
We have 33 payments left on a ‘15 Highlander. I dread adding on another car payment. I hope that whoever is driving my next car is taking good care of it.
Cost of living went up.....wages stagnated.....standard of living went down.
Just like houses, if you have good credit, a down payment and reasonable expectations, you can have a very nice new car.
This is just inciting more class warfare and trying to get cars added to the list of “rights”.
Medical premiums will be more than the cost of a mortgage and already is for many.
Everything is so upside down.
I didn’t pay cash but five years ago I bought a 2005 Mercedes with 50,000 miles - for 1/3 of the sticker price. The only problems I’ve had were a cracked rim (was repairable) and a Crankshaft Position Sensor, which cost $35, installed myself.
...been a great car.
In 2015 I bought a certified pre-owned 2014 Jeep Rubicon with just over 14K miles. Some poor schlub paid a lot of money for the privilege of breaking in the engine for me :)
You got that right. Low mileage CPO is the only way to go. Previous car was a MB E550, current year model, 5k miles, better warranty than a ‘new’ car. Still smelled new. Saved $thousands! Similar deal with current car. (2013 SL63 AMG. 600 hp. I love capitalism!)
Using NADA
A Cadillac XTS, Luxury AWD trim, costs brand new $50k.
2014 same car w/ 25k miles, at a dealership is $27,800.
56% of the cost of new.
Only until it’s SUV “Womanized” with, super strong, heavy duty, coil springs, high shocks, 22” tires, on an 18” wheel rims and a 12+” height ground clearance.
I hate the deceptive advertising done by all car dealers who emphasize a “low” monthly lease price while the fine print tells you to first lay down a whopping heap of cash before you get the “low” monthy lease price.
Of course it is. Fun to make today dollar comparisons to yesteryear dollars, though.
But notice that today’s car is 50% costlier in constant dollars. Most all of that increase is due to government regulation. Of course, that HAS made cars a LOT safer and cleaner, no doubt about that.
“That’s a lie, pure and simple. (The author, not you.)”
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A agree, (With you,not the author.):-)
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