Over the years, the status of cars in the United States is a combination of bragging rights and function. This explains why the demand for them remains high despite the presence of other modes of transportation. The problem is many Americans these days may not be able to afford them.
The Challenge of Getting New Vehicles
A study illustrates the issue with buying a new car and highlights why used-car dealers, such as jtautogroup.com have never been this important.
According to research, many Americans may not be able to meet the 20/4/10 rule when it comes to getting a car loan. This ratio stands for 20% down payment, 4-years loan, and 10% of the income.
If those thinking to buy a vehicle decide to buy today, it’s possible that they need to extend their loans to two years more and spend more than 10% of their wages to the car even if they have already paid 20% down payment.
A report seems to corroborate this data. According to it, the average loan is already 68 months, which is almost six years. Moreover, for the first time, the average car financing reached over $30,000. As expected, the monthly payment has also increased to $503. This is also the first time it crossed the $500 mark.
There are different reasons Americans have a hard time paying for a new car. One of the strongest explanations is the disparity between the cost of cars and the incomes.
According to Kelley Blue Book, the average cost of a compact car is around $20,444. Meanwhile, the Bankrate.com report said 11 out of the 25 large metropolitan areas studied have households with an average income of less than $20,000.
This doesn’t mean used cars are getting cheaper either. However, within the last three decades, the cost of buying a secondhand vehicle has increased by only 25%. That’s 10 percentage points lower than that of a new car within the same period. Furthermore, the average service life of vehicles is already 11.5 years old. This means a used car can still have enough mileage or service value for its owners.