Cars and Drivers

Most Americans Can't Afford a New Car

Paul Ausick

Published: June 28, 2017 1:35 pm

Last Updated: January 12, 2020 10:36 am

The average price of a new car sold in May in the United States was about $33,300. In only one U.S. city does that price leave a positive margin between what the car costs and how much that city’s resident can afford to pay.

Calculating new car affordability involves more than just the purchase price of the vehicle. A common rule of thumb is called the 20/4/10 rule: a 20% down payment, a four-year car loan and a total annual cost, including insurance, of no more than 10% of household gross income.

Using the average May price calculated by Kelley Blue Book, local sales tax data for the TaxJar website and insurance costs from The Zebra, auto market experts at Bankrate.com calculated the affordable price of a new car in each of 25 U.S. cities and the difference (margin) between the average price of the car and the affordable price.

According to Bankrate calculations, only a resident of Washington, D.C., can afford to buy a new car without exceeding the 20/4/10 rule. The following are the five cities where a new car purchase is most affordable:

1. Washington, D.C.: $37,223.41 affordable price; 11.91% positive margin between affordable and average prices
2. San Francisco: $32,286.08; 2.93% negative margin
3. Boston: $30,863.38; 7.21% negative margin
4. Seattle: $26,771.36; 19.51% negative margin
5. Minneapolis-St. Paul: $26,605.71; 20.01% negative margin

Now, the five cities where a new car purchase is least affordable:

1. Miami: $13,576.83; 59.18% negative margin
2. Detroit: $13,912.50; 58.17% negative margin
3. Tampa-St. Petersburg: $14,189.35; 57.34% negative margin
4. Orlando: $15,902.47; 52.19% negative margin
5. San Antonio: $16,432.50; 50.60% negative margin

It’s worth noting that the average price of a used car in 2016 was nearly $19,200. Of the 25 metro areas included in the Bankrate study, the bottom eight don’t meet reach that level of affordability.