Ever see the rows of German luxury cars lining the streets in D.C. and wonder how all those people can afford them? As it turns out, Washington-area residents have a lot more money to spend on their cars than people do in any other major U.S. city.
A report released Tuesday by Interest.com, a Bankrate Inc. affiliate, calculated that residents of this region can, on average, responsibly spend $31,940 on a new car. That’s almost 20 percent more than the No. 2 city, San Francisco.
As it happens, the average price of a new car is $30,550. So the Washington area is the only place where the average person can responsibly afford the average new car. Considering the massive number of new cars sold in other places, fiscal responsibility is apparently not top of mind when most Americans go car shopping.
“What this research indicates, more than anything, is that a lot of Americans are spending too much money on their cars,” said Mike Sante, managing editor of Interest.com in a statement. “Car costs are one of the most controllable parts of a household’s budget.”
The way the Interest.com calculates how much each city’s residents can responsibly afford is pretty interesting. It considered three key factors in what the researchers call the “20/4/10″ rule: a down payment of 20 percent, four-year financing at average rates and total payments (including insurance) that don’t exceed 10 percent of a household’s gross income.