By many accounts, it’s harder than ever to be able to afford a vehicle. The economy is sluggish, jobs simply aren’t paying what they used to, and a new vehicle can be a huge expense — considering a monthly payment, insurance, and fuel costs. In some areas of the country, payments have reached levels that many experts fear is far too high.
A recent study conducted by iSeeCars.com dug into the idea further, examining what areas of the country are experiencing the most difficult time being able to afford a new or used vehicle. An ideal situation for auto loans, configured by using a methodology recommended by financial experts, suggests that customers pay a 20% down payment when buying a used vehicle, finance for no longer than 48 months, and incur a monthly payment of no more than 10% of their monthly income.
Using those guidelines, and by analyzing 25 million vehicles for sale across 50 top metropolitan areas in the U.S., only two came even close to an ‘ideal’ situation. The cities that ranked the worst were paying way more per month than analysts recommend — in many cases more than twice as much.
“The reality is that the low annual household income in some parts of the country is forcing people into car payments that are higher than they’d like, or for a term far longer than ideal, just to make them more affordable,” said iSeeCars.com CEO Phong Ly.
“When you overextend yourself, it makes it harder to keep up with your monthly payments and often next-to-impossible to save. The households in these regions that are at or below the median income are at a major disadvantage when it comes to buying a used car and staying ahead of the curve financially.”
By looking at factors including median household income, number of vehicles per household, and the number of cars for sale in a given area that are considered affordable, iSeeCars.com developed a list of the ten cities in which consumers are likely to have the most difficult time affording a used car. Read on to see the top ten.
10. Atlanta, GA
Residents of Atlanta, Georgia make a median household income of just over $57,700. ISeecars.com determined that an ideal total car payment should be between $23,000 and $24,000. In reality, it was found that the total car payment per household, given that each household has an average of 1.8 vehicles, lands more in the $47,000 range. That’s spending of 98% above what is recommended, and good enough for tenth place among the nation’s top 50 cities.
9. Oklahoma City, OK
Barely beating out the fine folks of Atlanta are residents of Oklahoma City, Oklahoma. Consumers in Oklahoma City were found to spend 99% more than what was recommended, facing real vehicles costs of roughly $42,000 when ideally, they should be paying around $21,000. This is based off a median household income of $50,402, an average of 1.8 cars per household and a market in which 55% of cars are considered affordable.
8. Las Vegas, NV
Few places were hit as hard by the recession as Las Vegas, Nevada and its surrounding communities. The economy there is still recovering, and that has translated into a harder time for residents to afford certain luxuries, buying used vehicles. Fifty-one percent of cars in the Vegas market are affordable, and consumers should ideally be paying $20,324. Instead, prices are closer to $40,575, 100% more than analysts suggest consumers spend.
7. Dallas-Fort Worth, TX
In the heart of Texas, consumers are paying 107% more for used vehicles than they probably should. Used cars in the Dallas-Fort Worth area cost nearly $51,000, when the recommended price is closer to $24,500. Median household income in Dallas is the highest among the top ten cities listed, at just above $59,000, but only 53% of cars listed are considered affordable, making for a tough time for consumers.
6. Miami-Fort Lauderdale, FL
Down in Miami, it’s all sun, surf, and unaffordable vehicle prices. Only 45% of used cars on the market are affordable, and with a median household income of $48,420, facing a real car payment of $39,138 can make for a tough go. The ideal total car payment in the Miami area is recommended at $18,500, making the total spent by consumers 111% above ideal.
5. Houston, TX
Residents of Texas living the Houston area have it even worse than those in the Dallas region, paying 112% more than what would be ideal. Houston has the second highest median household income of any city on the list at more than $58,000, but only 52% of used vehicles on the market are affordable. Real car prices tally up to $50,875, while consumers should be looking for $24,000.
4. San Antonio, TX
If you haven’t noticed, residents of the state of Texas apparently are getting the short end of the stick when it comes to being able to afford a used vehicle. The folks of San Antonio are no exception, and end up paying 113% more than they ought to. Ideal vehicle prices in San Antonio come in at $21,716, but in reality are $46,350.
3. Riverside-San Bernardino, CA
The Los Angeles satellite-communities of Riverside and San Bernardino, California are home to the most unaffordable used vehicle markets in the western United States. Consumers in these cities are looking at prices 117% above ideal, with real prices of $48,500 being the norm as opposed to $22,300, which financial professionals suggest. This is also the only area on our list in which households own 2.0 cars on average.
2. Birmingham, AB
The last two cities on our list reside in the South, and the first is Birmingham, Alabama. A mere 45% of the used vehicles on sale in the Birmingham market are affordable, according to iSeeCars.com. The residents of the city, with an median annual household income of a bit more than $48,000, have a hard time putting that money to good use, especially in the auto market. Residents end up paying real car prices of around $46,000, whereas ideal prices are $20,300. That’s 126% more than ideal.
1. New Orleans, LA
The city in which it is the most difficult to afford a vehicle is New Orleans, Louisiana. Twenty-seven percent of the used vehicles on the market are affordable, and consumers end up paying a whopping 140% above ideal prices. That ideal price is $16,648, but real car prices rack all the way up to nearly $40,000. If you’re looking for a city with a more modest lifestyle and vehicle affordability, New Orleans is not the place for you.
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