Can a middle-class budget buy a new American car? Probably not

[Yo_Mama_Been_Loggin]

Americans were paying about 38% more for a new car or truck over the summer than they were just 10 years ago. The average transaction price for some popular vehicles is up nearly 50%, 60% or even 70%. So how are drivers affording it? As CBS News found, many are not.

In Vineland, New Jersey, the typical family takes home about $39,000 a year after taxes. CBS News business analyst Jill Schlesinger recommended spending 10 to 15% of that income monthly on a vehicle. That leaves an average family there with about a $400 a month budget.

With that in mind, "CBS This Morning" co-host Tony Dokoupil visited family-owned Lilliston Ford. Manager Ivan Nelson showed Dokoupil a Ford Explorer, packed with technology. He also saw a powerful F-150 Lariat.

But did any of it fit that $400 budget? Not even close.

"Your monthly payment would be $853," Nelson said.

And that's life for a record number of Americans these days. The big three automakers are retiring many family sedans while rolling out souped-up SUVs and trucks at premium rates that families often can't afford without taking on loans that are now larger and longer than ever.

https://www.msn.com/en-us/money/personalfinance/can-a-middle-class-budget-buy-a-new-american-car-probably-not/ar-BBXajoV?li=BBnbfcN

The article doesn't say so but I've read the average cost for a new vehicle being sold goes from $36,000 to $40,000. The lowest priced new vehicle is around $15,000.

[ck4829]

1. "Middle class" is just a bumper sticker to put on those cars we can't afford

[Ohiogal]

2. Why am I seeing

so many new trucks on the road, then? Must be leases.

[MineralMan]

4. Yes, leases, in many cases. More and more people are leasing cars.

[safeinOhio]

5. Good 10 year old used cars

are much better than 30 year old new cars were.

Just my opinion.

[The Genealogist]

6. Yes, vehicles seem to be made better

I had a 1991 skylark that was my grandpa's. I got it in 1996. I got rid of it in 1998 because I to have several big things done with it. Transmission, and other expensive work. I have a 2006 Pacifica now, that I got in 2013. I've had to do little more than basic maintenance on it in the 6+ years I've had it.

[MineralMan]

3. That's why brands like KIA, Hyundai, Mitsubishi and others are

doing better these days. All of them have cars you can buy for under $20,000, with 5-year, 60,000 mile bumper to bumper warranties and 10-year, 100,000 mile powertrain warranties. Six-year financing or a lease can get you into a car for around $200-something a month even with an older trade-in. So that's where people are going to buy their new cars.

The American manufacturers are shifting to the SUV and truck market, and basically giving up on the economy car market. They can't compete any longer.

And guess what? Those South Korean and Japanese manufacturers are designing cars that meet people's needs. They're well-equipped, capable, and even fun to drive.

Middle-class families can still buy a new car. And they are doing just that.

[onethatcares]

7. but, but, but

I just saw the commercial where each of the spouses bought a new gmc pick up truck for each other. They luv them.

I just picture suzy cuberat driving to work in that thing, of course johnmacho would have his own to park in the office lot and dream of off roading or loading steel mano mano with his buds.

[SWBTATTReg]

9. I saw it too. Amazing that they were able to buy the two vehicles, and live where they show...

them living in the ad (of course probably don't, but look at the place, looks like it takes a million bucks to live there). Just shaking my head.

[onethatcares]

10. that's a million bucks in property taxes

maybe they're related to bezos or zuckerman?

Must be nice.

[Ohiogal]

13. Totally unrelatable

for the average person, for sure.

[SWBTATTReg]

8. It is ridiculous to look and see that new trucks, suvs, etc. are starting out at $60K+-, not...

counting sales tax, insurance, other fees. Also, remember that roughly 30% of the vehicles you pass on the road are in default or will be soon seized, that they (the car loans) are all underwater.

30% is a huge number and one that I can't understand. IMHO, if you're have a remote possibility of being underwater on a vehicle, don't default, don't walk away, don't screw up w/ your credit ratings (for you will seriously damage your scores), try to sell the vehicle first, etc. If you have any questions, see on YouTube videos by Steve Lehto, an attorney in MI who imparts very wise advice on car ownership (IMHO).

Don't buy that super expensive, souped up vehicle ... just because it looks prettier and so forth, going down the street. When the vehicle is seized later, for missed payments, you won't be going down the street very much afterwards, and your credit history/credit score is shot to heck.

[exboyfil]

12. Hard to sell if you are underwater

Of course it is better to do it on your terms than the car company or bank.

I got to think many people are just one bad decision/occurrence away in so many areas from the fiscal cliff. Some of those bad decisions might not even be bad decisions like buying a lemon out of warranty. The problem with buying cars is that you are dealing with asymmetric information. For this reason I have always bought new cars with their manufacturer's warranty. I just try to hold onto them as long as possible (my wife and I have had five cars (I'm 56 and she is 53). We currently own a 2002 Cavalier and a 2009 HHR. My daughter actually drives the Cavalier to her nursing job.

What really sucks is that so many communities do not have decent mass transit, and so many jobs are a patchwork of part time and on call. You get stuck in a community without an extended social network (someone to call when you are in trouble) you can easily lose your job.

[SWBTATTReg]

26. Very good point on many communities don't have mass transit, or even for that matter,

taxi companies where if you need to temporarily have an extra set of wheels take you into town etc. (my mom, fyi, 22+ miles to town and back, so 44 in total), should your car be in the shop for repairs or you're unable to drive due to illness or something else.

When my mom and dad moved to the outside of this town (not too small, 8K + in population), the town had two taxi companies. Now they have none, zip. I kind of doubt that there are any uber or lyft services there too, but I could be wrong. Thing was, it was literally a major hassle to get alternate transportation if you needed it.

Good point indeed.

[Blue_true]

20. No one that is underwater on anything is going to sell that asset for enough

money to pay off the loan. People are brutal in such situations, they will offer nothing for the asset and try to leave you stuck with every penny of debt. I learned that brutal reality when my first business was in trouble. The best way to not get underwater is not make the choices that got you in that situation to begin with. But if you are underwater on a car, let the bank repossess it, you actually would be better off in the long run.
Businesses are somewhat more complex, but if you see yourself going under and you still have enough cash to take care of all debt, shut down immediately and pay off the debt instead of continuing to struggle to turn things around (take it from me, unless you find an angel that has money, you won't turn things around).

[Blue_true]

23. People that have auto loans can't sell until the first lienholder

is satisfied. In fact, the first lienholder holds the title to the vehicle without which the vehicle can't legally be sold. A person can try something like making an agreement with chop shops to "steal" the car and chop it up into parts, but two problems with that, no one gets ahead dealing with thieves and second, the person still owes the loan.

[Drahthaardogs]

11. The new Jeep Grand Cherokee is $87,000 MSR

More duping of Americans. They lease their vehicles and never OWN anything

[UniteFightBack]

14. Oh please...you can buy an economical vehicle...if you WANT to. nt

[Codeine]

15. Buying a new vehicle is a financially unwise move.

There is far more value in your dollar to be found in used cars. Purchasing brand new means throwing many thousands of dollars into the fire for no more reason than the perceived status conferred by dealer plates and new car smell.

[NutmegYankee]

17. I disagree if you intend to keep the car.

If you buy it new, you know all the maintenance that went into it and you know you drove it right to set the rings. A used car can be a crap shoot as people who only keep cars for a few years can abuse or not maintain them well. I seen too many friends eat the sins of previous owners on used vehicles.

[meadowlander]

19. I got a three year old ex-lease vehicle at auction.

It had the whole maintenance history, less than 20,000 miles on it and I paid half what I would have paid for it as a new vehicle. Never had a single issue in the four years I've had it.

A new car drops 20% of its value in the first year (10% the second you drive it off the lot). Why not let someone else take that hit? You can find totally serviceable late-model, low mileage used cars for a fraction of the cost of a new one.

[NutmegYankee]

22. Why roll the dice?

Again, if I have the car for 20 years the cost as new (paid in cash) really didn't matter. Obviously a philosophical difference, but I like to be the only owner.

I also was very particular the last time on what features I wanted and what features I didn't. I got to custom order my car. I would never have found what I drive in the used market. (for starters - 6 speed manual)

[Blue_true]

25. I don't view a car as an investment.

I read this week that many Americans are taking out short-term loans to buy Christmas presents (yes, you read that right), so there is an abundant supply of financially clueless Americans around.

[flvegan]

16. Why buy new?

If you're going to keep the vehicle for a long time, I get it. If it's an emotional purchase ("but I WANT it&quot okay. If you feel the need to upgrade to the latest in safety, crash avoidance, crash rating and all that, understandable, I suppose. Business expense? Totally understand. Got Kardashian money? Knock yourself out. I'm not saying people shouldn't do what they want with their own money, I'm not THAT insufferable.

In my area, a quick check of the aforementioned new Ford F150 Lariat shows the first 100 examples (new, 2019/2020, 4WD, 8 cyl, etc) varying from over $80k (lol) to just north of $50k (still new, 2019/2020, 4WD, 8 cyl, etc). Certified used examples of the same truck (2019, 4wd, 8 cyl, under 15k miles) are in the high $30s.

$50k, with 10% down for 60 months at 4.5% interest is $839/mo and only if you don't even think about rolling tax and dealer BS "fees" into the loan. That's just the note. That says nothing about gas, insurance, maintenance (if not included with the new vehicle).

Full disclosure: I lust over the latest in automotive pornography. I ooh and aah at the new Mustang GT500, mid-engined C8 Corvette and the absolutely bonkers SRT Hellcat Redeye widebody. I just wouldn't buy one new even though I arguably could.

A quick look at Autotrader shows the lowest MSRP for a brand new car to be $14k and change though the advertised price is just north of $11k (2020 Chevy Spark).

BTW, not knocking the F150 at all. I had a monster crew cab 4x4 as a loaner for a week recently and I LOVED that thing.

[Blue_true]

28. Some cars are for the soul.

A Mustang Cobra, Corvette and Hellcat fall into that category. A person may drive them once a month, but a few hours out on open freeway brings the type of complete inner satisfaction that is hard to find any other way.

[Joe941]

18. I dont buy new - too expensive. 2-3yrs old with under 40k is more my price.

[Demovictory9]

21. k&r

[Kaleva]

24. Not that many families were able to buy a new car when I was young back in the '60's

College was out of reach for many back then too.

[evertonfc]

27. you'll stay in middle class

if your buying new cars at 39,000 per year income.

[RandySF]

29. Aren't we all supporting by our spouses cars for Christmas?

[Freddie]

30. My son just bought a new car yesterday

2020 Hyundai Santa Fe. Base model about $27000. He was going to walk out of the dealership unless they took off most of the ridiculous fees (destination fee, paperwork fee, etc). They did.
He originally wanted to get a young used car but the new one had financing at 1.9%. Nothing near that low is available for a used car. His monthly payment is only a little more than the 2018 model he was originally looking at (both 5 year loans). That’s how they get people to buy new.

[KentuckyWoman]

31. I am considered low middle

I recently bought a brand new small SUV with cash. I am in my 70s. First new car I ever had. I sold my 22 yr old Chevy to a teenager in the neighborhood. It was 4 yrs old when I bought it. I only sold it and got the new to give hubby peace of mind.

A car hot off the assembly line is great if the math works. But afford it or not, why?. Granted I am so frugal most think I am nuts, but save the money and use it for retirement savings etc.

The new car was $17,200.