Many drivers spend thousands of dollars more than they would have just a few years ago. With the increased prices for new and used cars, purchases are becoming less affordable than ever, especially in certain states. Which state has the lowest affordability ranking, and what can you do to find a good deal despite not being to afford some of the more popular vehicles?
Which is the least affordable state for a new or used car?
The new car list on iSeeCars shows Alaska as having the largest change in affordability for the three-year period. However, it’s not really considered the least affordable state to buy a car in because it started with a 96.17% affordability ranking.
If you dig deeper, the eighth-ranked state is Mississippi, and it began with the lowest (60.55) and ended with the lowest (52.62) affordability percentage. It ranks higher on the list due to the 13.1% change in the index number.
When it comes to the used car list, Mississippi lands toward the bottom at the 35th spot. Again, it started with the lowest (65.52) affordable ranking and ended with the lowest figure (51.17). Arkansas is another least affordable state for buying a vehicle, with pretty close index numbers to what Mississippi has.
How iSeeCars came up with the affordability index for used and new cars
The pandemic has caused supply chain issues in many industries, including the automotive market. New car prices rose 29% from August 2019 to August 2022, while used vehicle prices increased by about 52%.
However, total household income only rose 13%, which means many car buyers are taking out longer loan terms (than the typical 60 months for new and 36 months for used), and some may be paying higher interest rates. Or they may settle for a less desirable vehicle than what they set out to get.
To determine the affordability index, iSeeCars analyzed typical car loan rates and the associated terms and factored in the idea that auto loan payments would be no more than approximately 10% of the family’s income. By setting a baseline of what’s considered idealized earnings for buying a car, the analysts can determine whether a state or vehicle is affordable with the current prices or not.
It isn’t too surprising to see Mississippi has one of the lowest affordability rates on the list because it had the lowest median household income of $43,441 in 2019 before the pandemic began, according to Business Insider. Even the poverty rate was pretty high at 19.5%.
How to get a good deal on a car
With high car prices, getting a good deal on a vehicle that suits your needs will be tricky. The good news in all this is that there are some strategies you can use so you don’t end up paying way too much for the vehicle.
Before going to any car lot, you’ll want to consider getting financing first to know exactly how high you can go when searching for a vehicle. While you could get the loan through a dealership, you run the chance of getting stuck with higher interest rates, which might put you over your budget. Try not to get tricked into taking a longer loan term because you’ll likely pay more than necessary.
Widen your car search with both the models you choose and the locations where you browse for your next vehicle. For example, you might be in the market for a 3-row SUV, but some of them are hot ticket items right now.
Instead of only looking for a Chevy Traverse, consider other vehicles with three rows of seats, like the VW Tiguan with the third seat option. Also, expand your search to other areas further away from your home. There may be better prices 150 miles away than what you get 10 blocks from your home.
Mississippi began as the least affordable state for vehicle purchases, and it continues to this day. Finding the best deals will require budgeting and the boldness to stick to it despite dealerships dangling the longer loan-term carrot, like 72 months, to make car payments look smaller.