has taken a look at the 25 largest metropolitan areas in the US to determine which median-income households in those areas can afford to purchase a new car. As it turns out, only those living in Washington, D.C. can realistically swing the payment on an average-priced model. In 2012, new cars and light trucks carried a median MSRP of $30,550, and used the 20/4/10 rule to examine what exactly is affordable in each area.

The rule states that a buyer should be able to offer a down payment of at least 20 percent, incur financing for no more than four years and endure a principal, interest and insurance totaling up to no more than 10 percent of household income. That works out to a monthly payment of $601. Households with an average income in Washington, D.C. can afford a payment of up to $628, while the next closest city, San Francisco, can only afford $537 per month. You can pick through the cryptic press release below for more information.
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Median-Income Household Can Only Afford Average-Priced New Car in One of the 25 Largest U.S. Metros

CHICAGO, Feb. 26, 2013 /PRNewswire/ -- A median-income household can only afford the average-priced new car or light truck in one of the 25 largest metropolitan areas in the U.S. (Washington, D.C.), according to research released today by, a Bankrate (NYSE: RATE) company. published a related list of how much a median-income household in each metro area can afford to spend on a vehicle.

"What this research indicates, more than anything, is that a lot of Americans are spending too much money on their cars," said Mike Sante, managing editor of "Car costs are one of the most controllable parts of a household's budget. For example, if you live in New York City or San Francisco, you're probably going to have to pay a lot for housing, but you don't have to pay a lot for a car. You're better off driving something more affordable and saving or investing the difference."

When calculating how much a household can afford to spend on a car or light truck, considered three key factors that are commonly referred to as the "20/4/10" rule. That is: a down payment of at least 20%; financing lasting no longer than four years; and principal, interest and insurance not exceeding 10% of a household's gross income. recommends that median-income households spend no more than the following amounts on vehicle payments (principal and interest) in total and each month. For comparative purposes, the average price of a new car or light truck in 2012 was $30,550, according to TrueCar. That equates to a monthly payment of approximately $601.

Metro Area
Affordable Purchase Price
Maximum Monthly Payment

1. Washington, D.C.

2. San Francisco

3. Boston

4. Baltimore

5. Minneapolis

6. Seattle

7. Portland, Ore.

8. Denver

9. San Diego

10. New York City

11. Philadelphia

12. Chicago

13. Los Angeles

14. Sacramento

15. Dallas

16. Houston

17. Milwaukee

18. Atlanta

19. St. Louis

20. Pittsburgh

21. Phoenix

22. San Antonio

23. Detroit

24. Miami

25. Tampa

More information is available at:

For each metro area, calculated 10% of the monthly median gross household income in that area and subtracted the average monthly insurance premium in that area to determine the maximum amount that the median-income household should spend on monthly car payments (principal and interest). used its Auto Loan Calculator to calculate how much the median-income household can afford to borrow. Assumptions: 20% down payment, 48-month loan, national average interest rate, roll the sales tax into the amount being financed. The calculator is available at:

Median incomes for each metro area were pulled from the U.S. Census Bureau's 2011 "American Community Survey" (the latest year for which data is available).

Insurance costs are 2010 statewide averages from the National Association of Insurance Commissioners (the latest year for which data is available).

TrueCar provided the average national cost for new cars or light trucks in 2012.

The average rate for a 48-month new car loan came from (January 23, 2013).

Sales tax rates were obtained from local governments and car dealers.


Since it was created in 1994, has been helping consumers make smart financial decisions.'s stories, calculators and interest rate tables also appear on the websites of more than 100 newspapers in 31 states, including the Los Angeles Times, the Chicago Tribune and the Dallas Morning News. is owned by Bankrate, Inc., which is among the largest and most trusted providers of personal finance advice and information on the Web.

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    • 1 Second Ago
      • 2 Years Ago
      It's, um, interesting, but it has been years since a 4-year loan was the norm, so it's hardly surprising.
      • 2 Years Ago
      Also it's kind of surprising that the median new car price is north of 30k. That's nearly twice the base price of nice compact sedans like the Dart, Jetta, and Corolla, which I contend something like 80% of car owners could get by with just fine.
        • 2 Years Ago
        yeah it surprised me too, especially with the quality of cars around 20k these days.
        • 2 Years Ago
        The median new *car* is almost definitely less than $30K, which is why they lumped trucks into the mix.
      • 2 Years Ago
      I call BS on comparing the *median* income to the *average* new car price. Use matching numbers. Just as outliers making insane amounts of money raise the average income (which is why we're talking about the median in the first place), outliers buying supercars and top-range luxury-mobiles raise the average car price. Compare median to median.
      Dwayne Hicks
      • 2 Years Ago
      Wow, alot of comments on this article. Perhaps what we drive has a alot to do with what it represents versus if one can afford it or not. For example in most suburbans near major cities you see the mall parking lots filled with BMW 3 series, Mercedes C class, GLK's, Lexus RX350's, Audi Q5's and what not. You wonder, how the heck are people able to afford these cars when the average HOUSEHOLD income is a tick under $50k a year? In the evenings sometimes I drive up and around the hills in our area and cruise throughout the neighborhoods with $300K - $450K houses and all I see in the driveways are older used Honda Accords, Subaru Outbacks and Camry's. Seems to me many folks that choose to cruse around in these $40 - $50K cars with leases are living an illusion.
        • 2 Years Ago
        @Dwayne Hicks
        You live in your home and spend maybe an hour a day in your car. Spend accordingly
        • 2 Years Ago
        @Dwayne Hicks
        A new C-Class can be had for about $350/month on a lease (a bargain vs. times past) which represents about 8.4% of a $50,000 gross income which is not an unreasonable percentage. The problem is with people who, despite notably lower available payments today, still choose to go with even nicer cars and spend 15% to 20% or more of their gross income on car payments. Same is true for housing. Too many wanted the bigger, nicer houses and were approved for and ACCEPTED way too high of a payment vs. incomes. The average size of houses had grown notably over the decades and had more features/amenities because people weren’t satisfied with just a little nicer house but wanted and expected a MUCH nicer house.
        • 2 Years Ago
        @Dwayne Hicks
        I'm not sure what you mean by "living an illusion." Personally, my car payment is a significantly higher percentage of my income than this guideline recommends. That's because cars are important to me, as I imagine they are to most people who frequent this site. To make that higher payment affordable, I've chosen to make cuts elsewhere in my budget, such as living in a more affordable place. I pay less in rent so that I can put more towards my vehicle. People make different financial choices in life because they have differing priorities. My choices are not wrong just because they aren't the same ones you might make.
          • 2 Years Ago
          Why are you trying to impress someone you will never meet? If they way a vehicle drives is important to you, you can always buy cheep and find the aftermarket to build the best car.
      • 2 Years Ago
      There are plenty of reliable, top performing cars under $30K. So why do you NEED to spend that much again?
        • 2 Years Ago
      • 2 Years Ago
      This sounds like it's based on replacing your car every 4 years; so continually having payments. I'm not sure that's the best logic for such a study. If, however, the vehicle was paid off after 4-years and then kept for another 4-6 years (8-10 y/o): that's money in the bank.
        • 2 Years Ago
        Imagine if you paid for the vehicle in cash, how much "money in the bank" you would have.
      • 2 Years Ago
      For lighter \"fair\", can we just comment on the guy in the picture wearing white socks with blue flipflops at a dealership?
        • 2 Years Ago
        But he has great hair. I'm balding. I'd wear socks with flops any day if I could have his hair.
      • 2 Years Ago
      Might be too early for this article. Most people haven\'t realized how damn broke they are yet, and are a long way from wanting to accept that fixing that problem is not going to be easy or happen quickly. America is the financial opposite of what it used to be.
      • 2 Years Ago
      Judging by a large portion of the comments, those of you who have money sense, now would be a grate time to start a financial counseling business. In about 5 to 10 years you are going to be SWAMPED with customers.
      • 2 Years Ago
      A car that's a couple years old, sold on a dealer lot with some of the original warranty remaining is the way to go.
        • 2 Years Ago
        Have you actually checked out the prices of 1 and 2 year old used cars? They are almost as expensive as brand new cars! The dealerships understand that mindset and they price their 1 and 2 year old used cars accordingly. If you want to save money on our car purchases- buy an economy car which has a recognized name plate, like a Corolla, a Civic, or a Fit, drive it for 90k, sell it and repeat. Yes, reality is..... very boring.
      • 2 Years Ago
      How is the median new car determined? Is it the median car for sale or the median car actually sold? If it is based on actual car sales, then someone is buying the cars, which means someone can afford them, and there aren't that many uber-rich folks who buy 10+ cars to skew the median that much. Thus, if there's a mismatch between median income and median car bought and if median income families buy median priced cars, it isn't that they aren't affordable, it's that people ARE ACTUALLY BUYING cars that are too expensive. (There are plenty of great options for well under $30k, so it if it is a question of affordability, they can always get one of those.) Or, the rule of thumb for car affordability is bunk.
        • 2 Years Ago
        Median does not mean average. In this story, it's the median income but *average* car price used.
      • 2 Years Ago
      Remember: buying a CPO car coming off-lease is the best way to actually buy a car. Period.
        • 2 Years Ago
        That really depends on the car. Would never buy a car that's built for speed (WRX, EVO, Corvette, etc) as a second hand car unless it's a classic, or you're a mechanic.
        • 2 Years Ago
        As the owner of a CPO car off a lease I agree. My car was a granny mobile. The previous owner only put 16000 miles on it the three years they had it. Score!
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