Are new cars affordable? Not for residents of these cities

Shopping for a new car can be stressful on a number of levels, the least of which is deciding what kind of automobile fits your budget. 

Unfortunately, new cars are unaffordable for most Americans, with a new Bankrate.com study finding the median-income household can absorb the cost of a new car in just one of the country's 25 largest U.S. metropolitan areas. Residents of that city, Washington, D.C., have a relatively high median income of almost $100,000, which means the typical household there can handle a car with a price tag of up to $37,223, the study found. 

Even used car purchases are out of reach for many consumers, the study found. The average price of a pre-owned car is about $19,200, or too expensive for residents in eight of the 25 biggest metro areas. Many middle-class families once enjoyed the tradition of trading in their old cars for the current models, but that practice has taken a hit because of two trends: a 35 percent increase in the cost of a new car over the past 35 years combined with a meager 3 percent increase in household income over the same time period, Bankrate.com said, citing an analyst for Autotrader. 

"The main point of this research is to illustrate how Americans are having to overextend themselves to pay for a new car at today's prices," Bankrate.com analyst Claes Bell said in a statement. "Low- and middle-income households are having to stretch loan terms to six or more years and/or spend huge percentages of their paychecks to afford reliable transportation, and it's very difficult to get off that hamster wheel of debt once you're on it."

Typical consumers in Miami have the toughest time affording a new car, given the lower median household income in that area. The median household in that South Florida metro area can only spring for a car with a price tag of $13,576, according to the "20/4/10" rule. 

That rule of thumb for car affordability means a household should make a down payment of 20 percent on a car, secure auto financing that lasts four years or less, and make sure that principal, interest and insurance together add up to no more than 10 percent of their gross income.

As Bell noted, Americans are now more likely to take out long-term auto loans than in previous decades because the practice lowers the monthly repayment amount on the vehicle. About one-third of all auto loans through February 2017 were for durations of between 6 to 7 years. Longer-term loans are also popping up more frequently for used cars, according to Automotive News

The average cost of a new car was $33,261 in May, according to Kelley Blue Book. With the Federal Reserve increasing interest rates, it's expected that auto loans will follow suit, adding to the borrowing costs for car purchasers. 

Below are the 5 most and least affordable cities for car purchases, based on the median household income in those cities. The price of an affordable car for residents of those cities is in parenthesis followed with the corresponding monthly payment.

Most affordable cities for locals buying cars 

1. Washington, D.C. (car price: $37,223 / monthly payment: $697)

2. San Francisco ($32,286 / $631)

3. Boston ($30,863 / $592)

4. Seattle ($26,771 / $532)

5. Minneapolis/St. Paul ($26,606 / $502) 

Least affordable cities for locals buying cars

25. Miami/Fort Lauderdale/West Palm Beach ($13,577 / $256)

24. Detroit ($13,913 / $273)

23. Tampa ($14,189 / $268)

22. Orlando ($15,902 / $309)

21. San Antonio ($16,433 / $324)