In the Dallas-Fort Worth area, trying to buy a new car might just drive you up a wall. A new study by personal finance website Bankrate.com ranks DFW eighth worst among the country’s 25 largest metro areas for being able to afford a new car.
For the study, Bankrate.com used car price data, monthly car insurance costs, local sales taxes, population figures, and income statistics to come up with what a median-income shopper can afford for a new car.
The study adhered to the “20/4/10” rule: a 20 percent down payment, a four-year auto loan, and principal/interest/insurance payments comprising 10 percent of a household’s gross income.
For the DFW area, the “affordable” price of a new car before taxes was $19,038, according to the study. However, that was 42.8 percent below the average price of a new car in the area.
The situation is even worse in the Houston and San Antonio metro areas (Austin was not included in the study).
In the Houston area, the affordable price was $18,858, which was 43.3 percent below the average price of a new car. Among the 25 metro areas, Houston ranked seventh worst for new car affordability.
Meanwhile, the San Antonio area was the fifth worst for new car affordability. The affordable price was $16,433 — 50.6 percent below the average price of a new car.
“The main point of this research is to illustrate how Americans are having to overextend themselves to pay for a new car at today’s prices,” Bankrate.com analyst Claes Bell says. “Low and middle-income households are having to stretch loan terms to six or more years and/or spend huge percentages of their paychecks to afford reliable transportation, and it’s very difficult to get off that hamster wheel of debt once you’re on it.”
The Washington, D.C., area was the only region where the study found a new car for a median-income household was actually affordable. At the end of the road was Miami, where the average new car price was 59.2 percent below the affordable price.