Half of US Households can only afford a $400 car note – Dr Boyce Watkins

Consumers are dealing with a “car-ownership affordability crisis,” according to a recent report by the auto-insurance app Jerry. New-car buyers in March paid over $47,000 on average, according to Kelley Blue Book.

“The typical American household can afford a car payment of around $400 a month,” Cox Automotive Chief Economist Jonathan Smoke said last year. “With an average monthly payment of nearly twice that, the new-vehicle market remains heavily skewed toward the most affluent buyers.”

Materials from the company show about half of households can afford a $400 monthly payment. A popular budgeting rule of thumb is to spend less than 10% of take-home pay on car payments. “Ten percent is the max if a household allows for reality for what housing costs are today and other forms of debt,” Smoke said. As households in the middle-income range can afford auto payments ranging from about $300 to $600, they can think of $400 as a “magic payment” level, he said.

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