Interest.com: Houstonians Spend Too Much On New Cars
by: Andrew Schneider, February 26, 2013 8:02:00 am
Mike Sante, managing editor at Interest.com, has a basic rule for determining how much a household can afford to spend on a new car or light truck.
“You shouldn’t be spending more than 10% of your gross income on your car payment — that’s your principal and interest — and your insurance cost. The sort of typical, average car payment in the state of Texas is right around $500 a month. And in Houston, we think it probably should be, for the median-income family in Houston, probably a little under $400 a month, more like about $380.”
The problem is that the average new car costs considerably more than that — about $600 a month.
“The car industry is very good at getting us to spend just as much money as we possibly have on their products. And a lot of people think, ‘Well, you know, if I can write the check and it doesn’t bounce, then I’m good.’”
Houston is hardly alone in this situation, Sante says. Washington, D.C. is the only one of the 25 largest U.S. metro areas where a median-income household can afford the average priced new car. Not coincidentally, D.C. also has by far the highest median income among the top 25.