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.
That ought’a be a big hit on the freeway during a blizzard ...
Commercially designated lifestyles generally aren’t cheap.
I think the point is that today’s financial struggles are not any more an extreme burden than in the past. The problem right now is the downward trajectory and bleak prospects for an uphill climb.
Last numbers I saw was the median income per household in the US in 2015 was around 57K.
40% of that is about 23K. The last average price of a new vehicle was 33K.
Maybe that is affordable or maybe most should be looking at SMART cars, I don’t know because on a household income of even 60K, after taxes, insurance, rent (mortage plus upkeep), food, utilities, I don’t know how anyone easily buys the average new car today.
Tell me the cost of grocies, of sufficient quality and quantity, to keep you and yours in good health.
Do you believe $9,000 is expensive for a new car? Maybe we need to define be what expensive means.
I got 200k+ miles on my last Acura before donating. Great car but it didn’t even have keyless entry.
That's odd. because I never once even heard my folks or anyone else back when talk about high taxes, home prices, medical insurance, high energy prices, taxes etc.
It was rarely discussed because for the most part, it was all very affordable. Now? For the past couple decades that's all people talk about is the price of everything except wages going up.
And I don't think any of this is a secret.
I get your point(s). Are are you making a _plug_ for something?
No, I’m not going to give you all that.
Look, if ya think homes, new cars, health insurance, etc are all very affordable for the average young Americans nowadays, I can’t help ya.
Lucky you!
I did not ask for help. Neither did I say new cars were very affordable for the average young American. Maybe you want to argue against what I actually said.
Wasn’t the Affordable Car Act supposed to take care of this?
In 2004 I bought my last new car an 03 Mazada MPV, top of the line loaded, sticker was $31,000 at the time and I about died. Wife wanted it and it was well into 2004 and the dealership wanted rid of the 03 so they dropped it to $23,000, still was not happy but bought it. We drove it into the ground, got right at 200,000 and started noticing little issues that were adding up and traded it for a used Murano.
My daughter was driving an 03 Ranger and is about to have a baby and the Ranger is not conducive to hauling a baby around so last week I went to the used car market and found her a nice 08 Highlander with 122,000 miles on it. For a little over $10K she should be set for several years.
Pass on the new cars, the unions can take two running leaps and jump straight into hell. I seriously doubt I will ever buy a new car ever again, they are way over priced and why take the depreciation hit.
OK, you said used cars. Got it.
So you agree, homes, new cars, health insurance, etc, all those normal things, all very affordable for the average young Americans nowadays?
A slave of Virginia, eh?
Actually you did, when you requested I provide with itemized lists. Again, I can't help ya there.
I don’t know about other cars, but so-called ‘safety’ systems, like airbags (which, I, of course, remove immediately), anti-lock brakes, and stability control - along with emissions controls that require tailpipe air to be cleaner than what goes in the front end, likely are responsible for half the costs of cars today.
I mean look at virtually EVERYTHING else these days...cheaper, often much cheaper, than 10 or 20 years ago. Why not cars? See above for answer.
I had a 2000 Accord for 14 years....devastated to trade it in, now I lease Honda’s every 3 years.
I leased a car last year. Yes, insurance is basically the same as having a loan. You must maintain full coverage, obviously. Gap insurance is built in in PA.
I put less than 10k miles/year, so leasing is a good deal.
It’s looking at it differently. I’m not buying a car, I am buying reliable transportation for one monthly payment. No surprises.
Rather than finance the entire price of a car and then do the same thing again after 5/6 years, just pay for the portion of the car that you use.
You are so wrong. Meat at 6.99 a pound and that can make six sandwiches (maybe). I have a family of 6 (3 teenage boys and a 9 year old daughter) and we spend 800 dollars a month on groceries where 10 years ago it was maybe 200. A car today costs 20K if you go cheap where 10 years ago it was 10K. Since Bush I, prices have been horrid. Ok so I did ok on my home by selling a home in Maryland for 1.3 million and buying a home for 270K in Florida. That was about the only good news financially that has happened in 10 years plus. You need to wake up as I responded to you before because either you live in a bubble of the rich and famous or you are ignorant of surroundings.
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