South Floridians may love their cars and spend a lot of time in them -- but they can barely afford to buy a new one.
The area ranks next to last out of the 25 largest U.S. metro areas in a new-car affordability study. It analyzed median income along with the cost of buying a new car and insuring it, and was conducted by Interest.com, which is owned by North Palm Beach-based Bankrate.com.
A new car now costs north of $30,000 on average, the highest ever, according to data released last week. That price tag increases monthly payments to about $600 per month -- or double what median South Florida households can afford.
The report determined such families in Broward, Palm Beach and Miami-Dade counties can afford to spend only $295 a month on car payments while paying pricey insurance.
Deerfield Beach financial planner Blair Shein recommends to his clients -- no matter how affluent they are -- to consider buying a two- or three-year-old car that has absorbed most of the depreciation of a new car.
Better, he said, to splurge on car insurance -- to protect what you have.
"We live in a litigious world," Shein said. "People are quick to sue."
The rocketing cost of buying a new car was outlined in Kiplinger's Personal Finance March report. Average transaction prices soared to a record high of $31,228 at the end of 2012, up $542 from the previous year, the magazine reported.
"Some of the increase can be traced to pricey options, such as infotainment systems, and some is due to carmakers' retreat from cash rebates in a robust sales environment. (Notable exceptions are large trucks and SUVs, which still come with $3,000 cash back,)" said Kiplinger's.
Florida also now has the 10th highest median car insurance cost of the 50 states, which increases the cost of owning a car here, reported CarInsuranceQuotes.com, another Bankrate-owned website.
The Legislature hopes the personal injury protection insurance reforms, which recently went into effect, will help lower costs to owning a car. PIP portions of car insurance should go down 15 to 25 percent in the months ahead, estimated Lynne McChristian, Florida representative of the nonprofit Insurance Information Institute. PIP accounts for about a fifth of the total auto insurance premium, McChristian said. "Remember it will take some time," she said.
However, South Florida attorney Russel Lazega is skeptical that consumers will see PIP go down by that much.
"Most companies haven't scaled back their rates," Lazega said.
For now, Interest.com recommends that median-income South Florida households should make a down payment of at least 20 percent, take out no more than a four-year auto loan and spend no more than $15,188 to buy a vehicle.
Over five years, median household income fell to $48,880 in 2011 in Broward, $40,552 in Miami-Dade and $48,953 in Palm Beach County, according to the latest statistics from the U.S. Census Bureau.
But South Floridians aren't the only ones who can't afford a new average-priced car.
Only median-income households in Washington, D.C. can afford the average-priced new car or light truck while median-income people in the other 24 largest metropolitan areas can't -- even with a 20 percent down payment. Even median-income New Yorkers, Bostonians and San Franciscans can't afford the average priced new vehicle, Interest.com found.
"What this research indicates, more than anything, is that a lot of Americans are spending too much money on their cars," Interest.com managing editor Mike Sante said in a statement. "Car costs are one of the most controllable parts of a household's budget."
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