Most Americans Can't Afford a New Car: Report

A new study shows a median-income household can only afford the average-priced new car in one of the 25 largest U.S. metropolitan areas.

The study, conducted by Bankrate, reviews incomes and vehicle costs in the 25 largest metro areas in the U.S. while following the “20/4/10” rule. For those not familiar with the 20/4/10 rule, it says a car buyer should aim to put down at least 20 percent of a vehicle’s purchase price, take out a car loan no longer than four years, and devote no more than 10 percent of annual income to car payments, interest, and insurance.

With the rule in mind, Bankrate turned to Kelley Blue Book to determine the average price for a new car or light truck sold in the U.S. in May 2017, which was about $33,300. It then used insurance data from The Zebra, local sales tax data from TaxJar, and data on population and household incomes from the census to calculate each city’s affordable price after taxes and insurance costs.

The study found typical households in most of America’s larger cities don’t earn enough to afford the average new vehicle, if they follow the 20/4/10 rule.

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The most affordable city to buy a car this year is Washington, D.C., with an 11.91 percent margin between affordable price ($37,223.41) and average price. Surprisingly, San Francisco, California comes in second with an affordable price of $32,286.08, 2.93 percent under the average price. Rounding out the top 10 are Boston ($30,863.38 average price), Seattle ($26,771.36), Minneapolis-St. Paul ($26,605.71), Baltimore ($26,355.39), Denver ($24,485.39), San Diego ($23,439.74), Chicago ($23,386.08), and Portland, Oregon ($23,208.91).

At the opposite end, Miami is the least affordable city ($13,576.83), followed by Detroit ($13,912.50), Tampa, Florida ($14,189.35), Orlando, Florida ($15,902.47), and San Antonio ($16,432.50).