AS prices for new vehicles continue to rise, the cost of an average new car may be a stretch for typical households.
A new analysis from Bankrate.com found that a median-income household could not afford the average price of a new vehicle in any of the 50 largest cities in the country, though cars are more affordable in some cities than others.
“The new reality is that cars are becoming more expensive,” said Steve Pounds, a personal finance analyst for Bankrate. “People are having to make tough decisions about financing.”
The average price of a new car or light truck in 2016 is about $34,000, according to Kelley Blue Book. That’s in part because new cars are loaded with helpful but expensive safety features like collision-avoidance systems.
Bankrate calculated an “affordable” purchase price for major cities, using median incomes from United States census data, and factoring in costs for sales taxes and insurance. In San Jose, Calif. — the heart of Silicon Valley — the median income is about $84,000, and an “affordable” new car purchase price is about $33,000 — close to, but still below, the average new car price.
In lower-income cities, however, affordable purchase prices for a typical family are far below the average cost of a new car. In Hartford, Conn., where the median income is about $29,000, an affordable purchase price is about $8,000 — about a quarter of the average new-car price.