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.
In my experience, the insurance costs are the same. Having a newer car, with up to date safety features, lowers insurance costs.
Options like lane change warning, autimatic braking and rear cross traffic alerts are great features.
The GAP insurance is about $1/mo, and well worth it. This pays off your lease if you total the leased vehicle, so there are no early termination charges.
The three year costs of leasing vs. owning, all told, are about equal.
I ordered it new but did not arrive as I ordered: tri power, 383, duel exhaust and 4sp. Came with 400ci quadrajet 4 bl stone that put out 210 bhp. Factory changed order with a refund due to fuel constraints and noise regs. Oh well, it was great highway cruiser.
That same Charger could be worth 100 times that today.
Would love to just drive a car into the ground though. Maybe when I retire.
I refuse to pay more for a car than my house cost.
The average cars seems to cost $40,000 any more.
That’s how we buy new cars. And we haven’t had a car payment in over 20 years. We have a car savings account that money goes into every month. It’s separate from our other accounts. In 2013 we bought a 2012 Mercedes SUV with 8000 miles on it. Was a little over half what they cost new. Did the same thing when we bought my Jag. It was a year old with 13,000 miles on it. I’ve had the Jag 10 years now and as soon as it starts giving me trouble I’ll be looking around for another deal.
This is what happens when the NTSB and EPA over reach.
I’ve only ever bought 2-3 year old new cars,, they were new to me. .
“What changed??”
Nuttin but the meaning of AVERAGE
Average = working poor circa 2010 forward...???
For what car? An older one?
How much did that car cost total, with financing?
How much in repairs?
To get to zero dollars a month, you have an older paid off car, or were given one.
To get to the point you are, a lot of money was paid for the privilege, one way or another.
It is a false comparison.
I’ve railed at the cost of new cars for quite some time. Unfortunately, I have to admit, they don’t make them like they used to do and that is a good thing.
Aside from costs for material and labor, the major increase in costs for vehicles is the forced equipment inclusion and the environment and fuel requirements IMO. Thirty years ago when cars probably averaged around 15K, there were few airbags, multiport fuel injection, turbos and the like along with back up cameras, night vision, lane alerts, paddle shifters, plus a host of entertainment equipment.
My used vehicles, which were purchased used are all well maintained and driven little. My repair costs insignificant and I do them myself and I don’t need all that punitive new car insurance.
If you don’t drive a lot and know how to maintain a vehicle, in comparison, lease cars, new cars etc are little more than a rip off.
The average new car price today is in line with historical averages given median incomes. A new car average at 50% of median income is not high historically. The les-than-40% car price versus median income from the ‘70s to the ‘90s was low by historic standards.
Entry-level new cars today have features that would have been luxury or unavailable when new cars were at their relative cheapest. Not to mention improvement in acceleration and mpg.
Oh yeah, new cars are very affordable....Btw, have ya seen the price of a quality new pickup truck?
You are utterly and completely wrong. Groceries are expensive? You are falling for the exact nonsense espoused in this article. When I compare what food items are required to sustain a life in good health to prices found in a grocery I see cheap cheap cheap for even the less wealthy.
When I look at what is needed to own and drive a car that meets the basic requirement of safe and reliable transportation I again see cheap.
Socialism is a promise to make us equal even if that means equally miserable. It exploits man’s natural inclinations towards envy and greed. In this system relative differences are all that matter. It is not enough to have food enough to keep you healthy but you should have prime rib. A basic cheap used car is not good enough so you should have a fine car. If not it is unfair. Capitalism has indeed provided goods across all spectrums of affordability. The fact that people are unsatisfied with their choices and desire not what they need but what someone else has is a moral and spiritual failure that no mere corporation can address.
I have. That’s why I put a brand new factory engine into my 1998 K2500.
That’s fine.
Most folks today cannot maintain their vehicles (I used to as well).
And there is no question, that the older a vehicle gets, the more that breaks down with it.
Repairs today are more complicated than ever—and costly.
But I have a feeling you know exactly how useful a matchbook cover was and for what prupose because of its thickness. Am I right?
I disagree. Unions have driven up costs but they do not hold a candle to the government imposed cost through safety, fuel efficiency and other regulations.
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