Take heed before heading to the dealership. New research suggests many households cannot afford a new car. On average, a new set of wheels costs around $32,000, according to Interests 2014 Car Affordability Study, a price tag that is unaffordable for median households in 24 of the largest 25 metropolitan areas. The one city where a new car or light truck will fit into the family budget is Washington, D.C. The average household around the nations capital can swing a monthly auto payment up to $641, according to CNBC. Editors Note: Get Rich Doing This ‘One Thing’ Every Day The study took into account a variety of factors specific to each area, including median incomes, sales tax and insurance. The calculations also assume that buyers make a 20 percent down payment, but few people put down that much money, CNBC notes. To squeeze new vehicles into their budgets, consumers have been leasing and taking advantage of low interest rates and the availability of longer-term auto loans, Alex Gutierrez, senior analyst at Kelley Blue Book, tells CBS. In the fourth quarter of 2013, data from Experian reveals a record 20.1 percent of auto loans were stretched to six or seven years, according to CNBC. While [long-term loans have] worked out well for the industry in the short term, if interest rates begin to rise or lending conditions become less favorable, affordability could become a significant hurdle for those thinking about buying a new car, Gutierrez warns. Mike Sante, managing editor of Interest, sees new vehicle purchases as a problem in many households already. Just because you can manage the monthly payment doesnt mean you should let a $30,000 or $40,000 ride gobble up such a huge share of your paycheck, he tells CNBC. You can get a great car for much less and use the savings to invest in yourself. Here’s where the money for your retirement or kids’ college can come from. Sante says auto consumers need to start with a financial game plan and he endorses the 20/4/10 rule: put down 20 percent, limit auto loans to a maximum of four years and spend no more than 10 percent of your gross income on monthly payments and insurance. If you dont have a financial plan, all your discretionary income goes into your car, and you wind up . . . in a situation where youre living paycheck to paycheck, and wondering how that happened, Sante tells CBS. Read Latest Breaking News from Newsmax moneynews/Personal-Finance/car-auto-payment-vehicle/2014/03/13/id/559265#ixzz2zygFKmGr Urgent: Should Obamacare Be Repealed? Vote Here Now!
Posted on: Sat, 26 Apr 2014 08:07:07 +0000
Trending Topics
Recently Viewed Topics
© 2015