July 12, 2016

Will safer cars be too expensive for the typical family?

From the New York Times:
New Cars

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.

Full article here.

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  1. Not only would the initial capital cost be expensive
    – but all those bells and whistles will also increase repair and maintenance costs, too.
    I just say “keep it simple”.

  2. Another entitlement we cannot afford.
    Just because A/C, leather, NAV system , cruise control and ABS are sexy features does not mean we need them.
    Our education fails to educate people to differentiate between wants and needs. Few need a $34,000 average car ! Of course we want it. We deserve it. That is why the US has over $1T in fairly expensive 6%+ car loans. Banks love it. Politicians love the associated taxes to find their excessively paid civil servants.
    Financial responsibility starts at home and ought to be taught in school. Instead we discuss fringe topics like transgender bathrooms or windmills as the energy savior of mankind.
    Get a $10,000 used car. That too is a choice and gets you almost as comfortable and certainly cheaper from A to B.

    1. The economy needs it. Without all the people going into debt, the economy would collapse because it isn’t sustainable otherwise. As soon as people start getting sensible and start paying down their debts and saving money, the lobbyists and bank governor freak out and panic, followed by interest rates plummeting to punish people for saving and stimulate even more consumer debt.

      1. No one is forced to get into debt. No one is forced to buy a new car. Interest rates are low because of demographics and slow growth. If people had to pay less taxes, they had more money. The issue is ever growing governments, with excessively large and excessively well paid civil servants. That is what is killing the economy.
        Europe’s failed welfare state system is coming to Canada .. and the silence is deafening: http://moneytalks.net/article-and-commentary/michael-campbell/mikes-saturday-comment/17767-a-frightening-message.html

        1. I disagree that less expensive govt is the full solution. Don’t get me wrong, it’d be great if govt was more efficient with our money, but I still don’t think that’d be enough. Mike Campbell is right, and he’s been right on so many things. We’re continuously kicking the can down the road.
          But, even with smaller govt, our economy relies on ever expanding consumption. When we got to the point where Canadians (and Americans) had spent all their money, the economy slowed down. So, the “solution” to that was lower interest rates to encourage more consumption, paid for with debt.
          And, I disagree that no one is forced into debt. Why? Imagine if no one was allowed to go into debt to buy a home. If no one was allowed to have a mortgage, the price of homes would be a lot lower than now. But, if everyone else is using debt to increase their buying power then that means you are forced to as well, just so that you can compete. And, that goes beyond just homes. It’s getting a business loan, it’s buying cars, paying tuition fees, etc.
          Our economy is not self sustaining. It’s a giant pyramid scheme. That’s why we need ever expanding immigration. More people means more taxes paid and more consumers buying stuff.
          America kept kicking the can down the road, and they finally ran out of road in 2008. They paused, and decided to simply build more road. In Canada, we saw what happened in the US, freaked out, and started pre-emptedly building more road.

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