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Auto Buyer’s Affordability Index:
February 2015

Released: March 11, 2015
Phil Kelton, Requisite Press, LLC


The February 2015 Auto Buyer’s Affordability Index (ABAI) is 53.4 on a scale of 0 to 100. A score of 53.4 indicates that a U.S. median-income buyer following the 20-4-10 auto financing rule can only afford 53.4 percent of the February 2015 new-car average transaction price (ATP). This equates to a maximum affordable price of $16,381, assuming a median household income (MHI) of $54,332 and an average transaction price (ATP) of $30,676.

The ABAI increased more than 2 percent from the January index of 52.3, largely driven by a $675 drop in the average transaction price. The HMI experienced a small decrease of $85, leaving the maximum affordable price unchanged. As a result, February new-car buyers reclaimed $675 in buying power, for a total of $1,067 since December 2014.

Requisite Press expects a continued favorable trend in overall new-car affordability as a result of increasing price pressure. Potential sources of pressure include a degrading auto finance environment, increased OEM competition as sales volumes moderate, and increased competition from a growing used-car supply. Additionally, the gains made due to falling gas prices should dissipate as the supply of oil begins to tighten.

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.

The easiest way for new-car buyers to drive up their personal affordability score is to obtain the best market price through competition. The hassle of back-and-forth competitive negotiations can be avoided by requesting best-price, nonnegotiable quotes from multiple dealers. This can easily be done via e-mail. Dealers must go directly to their best price or risk losing the sale, and consumers will obtain the best market price while avoiding the hassle of negotiations.

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 affordable price ranges, 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 $54,332 and a monthly insurance premium of $130, the affordable monthly payment is $323.

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 $323, an interest rate of 4.04 percent, and a sales tax rate of 7.26 percent, the affordable price is $16,381.

The February 2015 ABAI was calculated by dividing the affordable price of $16,381 by the average transaction price of $30,676 and then multiplying by 100.

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

Option: Check a quote, Yearly Income: $54,332, Local Sales Tax: 7.26%, Monthly Cost of Additional Cars: $0, Term: 48 months, Interest Rate: 4.04%, Bottom-Line Price: $16,381, Down Payment: $3,276, Yearly Insurance Premium: $1,560.

Returns a monthly payment of $323, 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 $30,676. The average transaction price estimate was calculated by taking the Kelly Blue Book ATP forecast (without consumer incentives) of $33,299, and subtracting the TrueCar incentive forecast of $2,623. Both were published on March 3, 2015.

U.S. Median Household Income

The median household income used is $54,332. 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 February index is from the January 2015 Current Population Survey, and was derived and published by Sentier Research, LLC on March 4, 2015.

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

The interest rate used is 4.04 percent. The interest rate is the national average 48-month interest rate for February 12, 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 February 12th can be found at

U.S. Average Insurance Premium

The insurance premium used is $130 per month. The premium is based on state average insurance premiums published by for 2014, 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).

U.S Average Sales Tax Rate

The sales tax rate used is 7.26 percent. This rate is based on state average combined sales tax rates published by the Tax Foundation for the Midyear Update 2014, and then weighted by state population to develop a national average. Population numbers used were identical to those used for the insurance premium calculation.