A lot of Americans are driving around in cars they can’t really afford.
In fact, median-income households in 25 of the nation’s largest metropolitan areas can only afford the price of one new car, not two, – and that would be at the average price of $30,550- according to research released today by Interest.com, a Bankrate company.
“Americans are spending too much money on their cars,” said Mike Sante, managing editor of Interest.com.
The website deems a vehicle affordable if it fits within the “20/4/10” rule. That means a 20% a down payment; financing for no more than four years; and principal, interest and insurance not exceeding 10% of a household’s gross income.
If you live in Washington D.C. or San Francisco you will likely have no trouble affording a Beemer. In Tampa, Fla., however, you are probably looking at a low-end Chevy.
There’s never been any question about it: People strain their finances to buy cars, and automakers depend on low-interest rate financing to sell them.
Here’s a the maximum monthly payment that median-income households can afford to pay for a car in select cities, according to the website:
Washington, D.C., $628; San Francisco, $537; Boston, $507; Baltimore, $468; Minneapolis, $470; Seattle, $466; Denver, $432; San Diego, $433; New York City, $431; Philadelphia, $419; Chicago, $417; Los Angeles, $410; Sacramento, $397; Portland, Ore., $397; Dallas, $389; Houston, $386; Milwaukee, $373; Atlanta, $376; St. Louis, $371; Pittsburgh, $340; Phoenix, $348; San Antonio, $334; Detroit, $332; Miami, $295; Tampa, $282.
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