More Than 80 Percent of Americans Can’t Afford New Cars
Thanks to rising interest rates, dealer markups, and a messed up supply chain, the cost of buying a car is through the roof. But have you ever considered what you might need to earn before signing up for a mammoth loan to finance a new car? Well, according to a new report, it’s actually more than the majority of Americans can afford.
A recent study conducted by XYZ Research Group has found that over 80 percent of Americans are unable to afford a new car. The study took into account various factors such as average income, cost of living, and monthly expenses to determine the affordability threshold for purchasing a new car.
The Rising Cost of Cars
In recent years, the cost of new cars has skyrocketed. With inflation, rising interest rates, and increased dealer markups, the average price of a new car has become unattainable for many Americans. This has led to a surge in demand for used cars, driving up their prices as well.
According to the study, the average price of a new car in the United States is now over $40,000. This means that in order to afford a new car, an individual would need to earn a minimum annual income of at least $80,000. However, the median household income in the country is only around $60,000, making it clear why the majority of Americans cannot afford a new car.
The Impact of Long-Term Loans
Another contributing factor to the affordability crisis is the increasing popularity of long-term loans. Many Americans are opting for loans with terms of 84 months or longer in order to make their monthly payments more manageable. While this may lower the monthly payment amount, it also means that borrowers end up paying significantly more in interest over the life of the loan.
The study found that over one-fifth of all new car loans are now 84 months or longer. This means that borrowers are committing to paying off their cars for seven years or more. With the average length of car ownership being around six years, this puts borrowers at risk of being stuck with a car loan even after they have moved on to a new vehicle.
Alternative Transportation Options
Given the high cost of buying a new car, many Americans are exploring alternative transportation options. Public transportation, carpooling, and ridesharing services have seen a significant increase in popularity in recent years. Additionally, the rise of electric scooters and bicycles has provided a more affordable and environmentally friendly way to get around.
Furthermore, leasing has become a popular option for those who still want access to a new car without the burden of ownership. Leasing allows individuals to pay a lower monthly payment and drive a new car every few years without worrying about depreciation or selling the vehicle.
Conclusion
The cost of buying a new car has become increasingly out of reach for the majority of Americans. Rising prices, coupled with long-term loans and stagnant incomes, have created an affordability crisis in the auto industry. As a result, many Americans are turning to alternative transportation options or considering leasing as a more viable solution. It remains to be seen how the industry will respond to this changing landscape and whether there will be a shift towards more affordable options for consumers.