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.
The new Chargers are $28,000.
Moron. Your name is now mud with at least half of those who might read your drivel.
I’ve had someone tell me that I’m “buying someone else’s problem” in getting a certified pre-owned car. The way I look at it, the car has been certified by the dealer as to the basics (and I get the extended warranty) plus, as you wrote, someone else has kindly paid that depreciation for me! What’s not to like?
I lease my car, and have done so for years.
The lease is three years and 36,000 miles. You can pay about $10/mo. more and get 15,000 mi./year.
If you drive l2-15 K miles/yr., have no little kids or pets to ruin the car, leasing is much more attractive than buying new.
You put $2,000 down. For a new well equipped Sonata, about $235/mo. for a Sport model with sunroof..
A new Elantra—about $210/mo. Same down payment.
The car is fully warranteed for the lease. All you have you do is change the oil as required.
Turn it in after 3 years, with no dings or scratches larger than a credit card, and you pick out a new car and drive home.
The cost of a loan, losing a large down payment,and the tremendous depreciation cost of buying, plus the ripoff when you trade in—all of this goes away with leasing.
You always have a newer car, with updated safety features and creature comforts,without the issue of mechanical problems. Dealer gives you a loaner if there is. Free.
You can own a car free and clear after about 4-5 years of paying a loan—just in time for major mechanical breakdowns on a car with major depreciation.
Having owned cars for 40 years, I don’t miss this problem at all. I learned that you can love a car, but a car never loves you.
I would not lease an expensive car unless it is for vanity or business. But leases for mid-size Hondas,Toyotas,Hyundais are very affordable.
Make sure you get GAP insurance (about $1/mo.) from your insueranxce company. Dealers also have it but you need to ask for it. I have both for peace of mind.
I am on my fourth lease.
It is not for everyone, but it is for more people than ever before.
Having one owned car and one leased car is good for some two car families. Always have a newer car that way.
Also, the trend is toward the autonomous car/Uber/Lyft.
30 years from now, the concept of owning a car may be obsolete.
A car is just transportation.
I bought a brand new 2016 Chevrolet LTZ pickup last year Sticker Price $54,400. GM was having a 20% discount sale going and the dealer had and extra 5% off that. I got $26,000 trade in on my 2012 Ford XLT pickup. I was happy as hell with that deal.
Too bad your hero Obama destroyed hundreds of thousands of perfectly good used automobiles in order to stop global warming
Thats right-230K miles huh very impressive. We just switch around with our fleet or if my brother-in-law wants to sell an old car we buy from him as they take good care of their cars.
My “car” is vintage 2003 or 2004. I can’t remember.
Those are good goals...:)
Obama’s fault.
The Cash-for-Clunkers fiasco took all the good used cars off the market and people were forced to buy stuff they couldn’t afford. It’s 7 years later now and the crunch is tighter.
Reliability of many products follows a “bathtub” pattern. Lots of initial problems, then a long period of high reliability, followed by a sharp increase in failures near the end of the product’s life. By buying CPO, somebody else gets to “enjoy” the early failure problems and you get to truly enjoy the long middle period of high reliability. Given that so many cars can reliably hit 200,000 miles before serious reliability problems arise, who cares if somebody else drove it for the first 15k or 25k miles? (as long as they didn’t smoke cigarettes or eat lots of burritos)
I remember seeing new pick up trucks for sale $1999! No AC, no radio, standard shift. That was in 1970.
Then there were those new ones for sale in Arkansas which were out of state wrecked junk, rebuilt and drove into Arkansas where you could get a new clean title showing it had NEVER been driven.
My boss bought a brand new one, paid cash. Not long after I noticed a “slight” difference in the color of the paint on the trunk and rear quarter panel. a quick check showed lots of bondo all over those areas. A wreck that was rebuilt in Missouri by the salvage company.
In early 2015 I bought a Honda-certified pre-owned 2011 Honda Accord LX, single leaser with 32,000 miles for $16,000, roughly half the cost of a new 2015 one. Included one year full new car warranty and five year power-train warranty. Dealer must have put a couple of grand into it to bring it up to nearly-new spec.
Manufacturer-certified pre-owned single-lease vehicles are practically the only way to go.
I graduated college in 1991. Since that time I have owned 4 vehicles. And i still own 2 of them. My newest is a 2000, my oldest and main vehicle was built in october 1966 and regularly gets battered and beaten 4 wheeling.
I can more than afford a new overpriced vehicle without batting an eye, but feel no need whatsoever to waste money in that manner. There are litterally thousands of things that money could be better spent on.
It’s much better to keep your old vehicles and keep them well maintained.
You’ll save hundreds of thousands over the years not making suckers payments.
I can’t. Not just the car, but the insurance and the f*cking car taxes! Where the f*ck are we supposed to get the money?
Don't be daft.
It was the GD greedy wealthy insiders who concocted free trade bull sh*t, which all but looted the American economy while those SOBs got even richer.
A very good point.
I am considering leasing.
Are the insurance costs the same?
I have only bought used and never paid more then $10,000 with tax for the car. 3 year loan. I have known people paying $450 a month for their vehicle which is half the rent of the apartment they live in.
Remember obamas used car destruction? That drove the cost of used cars way up as there were fewer of them plus it raised the cost of new cars by distorting the market.
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