New Title Header Black r1 c

Print Print

Requisite Press logo 200

Auto Buyer’s Affordability Index:
April 2015

Released: May 13, 2015
Phil Kelton, Requisite Press, LLC


The April 2015 Auto Buyer’s Affordability Index (ABAI) is 55.2 on a scale of 0 to 100. A score of 55.2 indicates that a U.S. median-income buyer following the 20-4-10 auto financing rule can only afford 55.2 percent of the April 2015 new-car average transaction price (ATP). This equates to a maximum affordable price of $17,099, assuming a median household income (MHI) of $54,203 and an average transaction price (ATP) of $30,959.

The April ABAI was up more than 3% from the March index of 53.5. A $204 decrease in the average annual insurance premium drove the improvement, overwhelming unfavorable changes in both the MHI (-$307) and the ATP (+$370). April new-car shoppers gained $370 in additional buying power (the maximum affordable price change [$740] minus the average transaction price change [$370]).

Note: This month’s average annual insurance premium is based on updated state estimates published by for 2015. See ABAI Sources below for additional information.

The April ABAI increase marks four straight months of improving affordability since the ATP spike in December. Requisite Press expects continued downward pressure on new-car prices due to increased OEM competition as sales volumes moderate, increased used-car competition as supply grows, and degrading auto finance conditions. However, income growth has flattened in recent months, and if this trend continues, further affordability improvement could be muted.

No matter the trends, each new-car buyer can take action that significantly improves her own outcome.


Consumers are encouraged to maximize their personal affordability score, thereby preserving household financial security. A personal affordability score, just like the ABAI, is calculated based on income, down payment amount, financing terms, and new-car pricing. A score of 100 indicates successful adherence to the 20-4-10 auto financing rule.

Obtaining the best market price is key to achieving improved personal affordability. This can easily be done by requesting best-price, nonnegotiable quotes from multiple dealers via e-mail. When buyers use this method, dealers must go directly to their best price, or risk losing the sale. As a result, buyers obtain the best market price, and eliminate the hassle of back-and-forth negotiation.

Adherence to the 20-4-10 auto financing rule will amplify the positive effects of obtaining a great price. Consumers can keep an eye on their personal affordability throughout the car buying process by making use of AffordCheck℠, a free online tool developed by Requisite Press. Shoppers can begin using AffordCheck℠ early in the car-buying process to determine an affordable price range, and then can easily assess the affordability of specific offers as they are received.

ABAI Methodology

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.

An affordable monthly payment (including principal and interest) was calculated by taking 10 percent of the U.S. monthly median household income, and subtracting a U.S. average monthly insurance premium. For an income of $54,203 and a monthly insurance premium of $113, the affordable monthly payment is $339.

An affordable price was then calculated using the affordable payment, along with a U.S. average 48-month auto loan interest rate, and a U.S. average sales tax rate. A 20 percent down payment was assumed. For a payment of $339, an interest rate of 4.32 percent, and a sales tax rate of 7.25 percent, the affordable price is $17,099.

The April 2015 ABAI was calculated by dividing the affordable price of $17,099 by the average transaction price of $30,959 and then multiplying by 100.

The affordable price result can be easily recreated by using AffordCheck℠:

Option: Check a quote, Yearly Income: $54,203, Local Sales Tax: 7.25%, Monthly Cost of Additional Cars: $0, Term: 48 months, Interest Rate: 4.32%, Bottom-Line Price: $17,099, Down Payment: $3,420, Yearly Insurance Premium: $1,356.

Returns a monthly payment of $339, and verifies a 20 percent down payment, 10 percent income, and corresponding Afford Score of 100.0.

ABAI Sources

New-Car Average Transaction Price

The average transaction price reference used is $30,959. The average transaction price estimate was calculated by taking the Kelly Blue Book ATP forecast (without consumer incentives) of $33,560, published May 1, 2015, and subtracting the TrueCar incentive forecast of $2,601, published April 27, 2015.

U.S. Median Household Income

The median household income used is $54,203. The median household income is published by Sentier Research, LLC on a monthly basis, based on the Current Population Survey data. There is a one-month lag in publishing the data, so the latest available data for the April index is from the March 2015 Current Population Survey, and was derived and published by Sentier Research, LLC on April 23, 2015.

U.S. Average 48-Month Auto Loan Interest Rate

The interest rate used is 4.32 percent. The interest rate is the national average 48-month interest rate for April 16, 2015 published by based on a weekly survey of large banks and thrifts. does not keep an archive of past rates. However, the rates for April 16th can be found at

Note: The survey participants changed again in April. This change drove a 10 basis point jump in the April 16th average.

U.S. Average Insurance Premium

The insurance premium used is $113 per month. The premium is based on state average insurance premiums published by for 2015, and then weighted by state population to develop a national average. The state population estimates are from the Census Bureau’s Population Estimates Program, Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2014, 2014 Population Estimates (NST-EST2014-01).

Note: The average insurance premium fell $17 this month as a result of updating to the 2015 study results. Average state insurance premiums fell in 49 of 51 states (including District of Columbia), when compared to the 2014 study results. Notably, the 2014 study was based on 850 models, whereas the 2015 survey is based on the cheapest-to-insure 2015 model-year versions of America’s 20 best-selling vehicles.

U.S Average Sales Tax Rate

The sales tax rate used is 7.25 percent. This rate is based on state average combined sales tax rates published by the Tax Foundation for 2015, and then weighted by state population to develop a national average. Population numbers used were identical to those used for the insurance premium calculation.