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It’s easy to overspend on the everyday items that we buy like electronics, toiletries, and even food, but it’s even easier to overspend when it comes to buying a car. No, we don’t only mean buying that Lexus when you can really only afford a Toyota, but as it turns out, most Americans are simply buying too much of a car relative to their household income. As such, here is the list of the top 10 U.S. cities that overspend on cars according to data from WalletHub.

The top 10 cities that overspend on cars

  1. Rio Grande City, TX
  2. Willis, TX
  3. Livingston, TX
  4. Alice, TX
  5. Bastrop, LA
  6. Donna, TX
  7. San Juan, TX
  8. Leesville, LA
  9. Uvalde, TX
  10. Alamo, TX

As we can see, the list is very Texas heavy and it should technically come as no surprise considering there are plenty of cities in that massive state to get data from. Speaking of data, WalletHub compiled this list by comparing the median auto-loan balance of over 2,500 cities across the nation. Then they took the average household income in each state to obtain the debt-to-income ratio for each one and ranked them accordingly.

For example, the median auto-loan debt for Rio Grande City, TX, is $23,457 and the average household income is $27,419. As result, the debt-to-income ratio for that city is 86%, which is why it tops the list as the city that overspends on cars.

Source: WalletHub

Here are the cities that overspend the least on cars

  1. Los Altos, CA
  2. Cupertino, CA
  3. Birmingham, Mi
  4. Lexington, MA
  5. Palo Alto, CA
  6. Saratoga, CA
  7. Needham, MA
  8. Garden City, NY
  9. Hoboken, NJ
  10. Mclean, VA

In case you might be wondering, Los Alto, CA, tops this end of the list because the average auto-loan debt is $16,193, while the average median household income is $180,479, which leads to a 9% debt-to-income ratio. According to WalletHub, the average income for each city is based on the 2019 earnings of individuals that are age 16 and above and worked full time.

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Two Turkish women at AUDI; Ali Haydar Berkpinar, a Turkish salesman giving advice on the Audi TT. | (Photo by Yavuz Arslan/ullstein bild via Getty Images)

Why do so many Americans overspend on cars?

It’s not so much a question of “why,” but it’s more so about “how” Americans overspend on cars. Looking at this data, we can deduce that the lower the average income, the higher the debt-to-income ratio will be by default since the average price of a new car is around the $40,000 mark. Conversely, if we look at the cities that overspend the least on cars, we can see that the average median income is well over the $100,000 mark, with the amount spent on cars being much lower, typically under $20,000.

However, if you happen to be in the scenario where you’re carrying a high debt-to-income ratio due to your auto loan or if you plan on buying a new car soon, then here are some tips you can follow:

  • Shop for a good interest rate: Just like shopping for a car, you can find the lowest interest rate and save money by shopping around different banks and credit unions. The same goes for refinancing your current auto loan.
  • Pick a shorter loan term: According to Edmunds, your loan shouldn’t be longer than 60 months, however, the shorter the better.
  • Pick your next car carefully: It’s important to weigh out your wants and needs when buying a car, but be sure to think of pricing as well and ensure that you can comfortably afford it.
  • Time your purchase: If you want to save money on your next car, start shopping at the last quarter of the year, and preferably at the end of the month. Dealerships have quotas to meet and cars to sell, so their “needs” could work in your favor.

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