Most people bought their first used car by scraping together some cash and buying whatever they could afford. While that's still the case for millions of people, a new study says millions others cannot afford to buy the average used vehicle in their city. Car search engine iSeeCars.com analyzed 25 million used cars sold in the 50 largest metropolitan areas in the U.S. and concluded most would leave the average household over-extended.
"The fact is, buying a used car or truck is just not realistic financially for millions of Americans," said iSeeCars.com CEO Phong Ly. Ly crunched the numbers for used vehicle sales following the "20/4/10" standard where used car buyers put down 20 percent, take out a loan no longer than four years and spend no more ten percent of their monthly income on a car payment. Using that formula, iSeeCars.com found people in some cities like New Orleans will spend 140 percent more than what's ideal over the course of that vehicle's life. "Low annual household income in some parts of the country is forcing people into car payments that are higher than they'd like, or for a term far longer than ideal, just to make them more affordable," said Ly.
IN-DEPTH
- Poverty Rates Dips, but Wages Remain Flat
- 'Wage Theft' Costs Low-Income Workers Billions
- Harvard: Wealth Gap May Get Worse
-- Phil LeBeau, CNBC