Category: Uncategorized

According to a recent study from Bankrate.com, the average new-car price tag is too high for the majority of medium-income U.S. households. Here’s the breakdown:

In May, Kelley Blue Book updated the average new-vehicle transaction price to $33,261.

Using that transaction price, Bankrate applied the traditional 20-4-10 rule to conduct the study – i.e.:

• a down payment of 20 percent
• a four-year loan
• principal, interest and insurance payments accounting for 10 percent of the household’s gross income

From looking at your own portfolios, you probably know that the majority of American consumers don’t put 20 percent down on their vehicle, and they are often financing for upwards of seven years. The fact that consumers don’t use the 20-4-10 rule should give you a good picture of the state of American finances in comparison to vehicle prices.

It should come as no surprise that Bankrate’s study came back showing that only one metro area could afford the average-priced new vehicle – Washington, D.C., where the median income is nearly $100,000.

Despite the fact that, according to Bankrate, most households can’t afford to purchase a new vehicle, new unit sales are still on par with last year’s levels. The most recent LMC Automotive/J.D. Power forecast puts 2017 new vehicle sales volume in the low 17 million-unit range for the year.