WASHINGTON — Buying a new car is becoming less and less affordable. For the first time ever, the average price of a car nationwide is $34,449 according AAA Mid-Atlantic.
“It’s the highest price point for the average new car,” said John Townsend with AAA mid-Atlantic.
The 12.5 percent spike over the last year is good news for dealers who traditionally see a lot of traffic over the long Memorial Day weekend. Also soaring is the cost of used cars, with an average price tag of $19,866.
For consumers the prices hit especially hard because cars lose 20 percent of their value when you drive off the lot.
With car costs up, more people are electing longer loans or are going with leases according to Townsend.
According to AAA, the number of people leasing a car is up 28 percent over last year.
Townsend said there are ways buyers can get the car they want for a price they can afford, but first it takes research.
“Know exactly what you are looking for before you head to the car lot,” Townsend said.
Townsend recommends driver use the 20/4/10 rule which means put 20 percent down on the car, limit loans to four years, and don’t get a payment that is more than 10 percent of your gross income.
Negotiating your loan and car separately is also recommended by Townsend. He said consumers should get preapproved for a car loan before even heading to the dealership.
He also said savvy buyers work out their budgets ahead of time and know how much they will ultimately pay for the vehicle before the loan is paid off.
Finally, Townsend said that, for some, a home equity line of credit could be an alternative to a traditional car loan and provide lower interest rates. He does have a word of caution for people using this option.
“That can be risky, if you run into financial trouble because you do not only jeopardize homeownership, but keeping the car, also,” Townsend said.
