Requisite Press Reports Minimal Change in New-Car Affordability Gap in May

LOS ANGELES, June 11, 2014 /PRNewswire/ -- Requisite Press, LLC reported today a May 2014 ABAI of 52.3. A score of 52.3 indicates that a U.S. median-income buyer following the 20-4-10 auto financing rule can only afford 52.3 percent of the May new-car average transaction price (ATP). This equates to a maximum affordable price of $15,763, assuming a median income of $52,959 and an ATP of $30,123.

While the May ABAI increased slightly from the April index of 52.1, the gap between the affordable and average prices remained greater than $14,000. The May ABAI increase was largely due to an ATP decrease, down 0.7 percent from last month.

"There are a few good options in the affordable price range," said Phil Kelton, president of Requisite Press. "However, the variety and quality of choices—particularly for families—increases significantly by bumping up the spending limit. These choices become accessible with a long-term loan, but household financial security suffers."

A $24,000 car financed with a 7-year loan, results in monthly payments similar to the affordable scenario. However, the total cost of the purchase increases by more than $11,000, including more than $2,200 of additional interest cost.

The monthly ABAI was developed to enable buyers to easily view current new-car prices in the context of sound financial advice. The 20-4-10 auto financing rule consists of a minimum 20 percent down payment, a maximum 4-year loan term, and monthly payments of no more than 10 percent of gross household income. The rule is widely recommended by personal finance experts to maintain financial security, avoid excessive interest costs, and preserve future investment opportunities.

For additional information:

http://www.requisitepress.com/ABAI

Methodology:

An affordable monthly payment (including principle and interest) was calculated by taking 10 percent of the monthly median household income, and subtracting a monthly insurance premium. The affordable price was calculated using this monthly payment, a 20 percent down payment, a 48-month term and interest rate, and sales tax. The index is equal to the affordable price divided by the average transaction price, and then multiplied by 100.

Sources:

Median household income is based on the latest U.S. Current Population Survey, derived and published by Sentier Research, LLC (May 30, 2014).

May 2014 average transaction price reference is a combination of industry sources.

U.S. average 48-month interest rate as published by Bankrate.com (May 15, 2014).

2014 state monthly insurance premium averages as published by Insure.com (Feb 21, 2014).

2014 state combined sales tax averages as published by the Tax Foundation (March 18, 2014).

U.S. state population estimates were obtained from the Census Bureau's Population Estimates Program (July 1, 2013)

About Requisite Press, LLC:

Requisite Press, LLC was founded in 2012 to publish select expert information with great potential for consumer quality-of-life improvement. The debut project was the application of commodity-buying principles to new-car buying, resulting in the book Power Shift: The New No-Stress, No-Hassle Way to Get the Best New-Car Deal—Every Time! Power Shift enables individual consumers to minimize new-car prices while obtaining an improved car-buying experience.

Contact:

Phil Kelton
310-896-2302
Email

SOURCE Requisite Press

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