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Auto Buyer’s Affordability Index:
May 2015

Released: June 10, 2015
Phil Kelton, Requisite Press, LLC


The May 2015 Auto Buyer’s Affordability Index (ABAI) is 56.2 on a scale of 0 to 100. A score of 56.2 indicates that a U.S. median-income buyer following the 20-4-10 auto financing rule can only afford 56.2 percent of the May 2015 new-car average transaction price (ATP). This equates to an affordable monthly payment of $342 and a maximum affordable price of $17,247, assuming a median household income (MHI) of $54,578 and an average transaction price (ATP) of $30,702.

The May ABAI was up nearly 2 percent from April 2015, and more than 9 percent since December 2014. Both income and price moved in a supportive direction this month with a MHI increase of $375 and an ATP decrease of $257. May new-car shoppers gained an additional $405 in buying power to bring the total gain to $1,907 since December. (Buying power is the change in the maximum affordable price relative to the ATP.)

The May ABAI increase marks five straight months of improving new-car affordability since the December price spike. New-car prices will continue to face downward pressure from increased used-car competition as supply grows, and increased OEM competition as sales volumes moderate. Requisite Press expects a continued favorable affordability trend as long as income growth continues.


No matter the current overall trends, each new-car buyer can take steps to boost her own personal affordability score. 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.

A key step to improving personal affordability is to obtain the best market price for the vehicle. This can easily be done by requesting best-price, nonnegotiable quotes from multiple dealers via e-mail. When buyers use this approach, 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.

Consumers can keep track of 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 (incl. insurance). The rule is widely recommended by personal finance experts to maintain financial security, avoid excessive interest costs, and preserve future investment opportunities.

The affordable monthly payment (including principal and interest) is calculated by taking 10 percent of the U.S. monthly median household income and subtracting a U.S. average monthly insurance premium. The affordable price is 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 is assumed. The ABAI is calculated by dividing the affordable price by the average transaction price and then multiplying by 100.

ABAI Sources

New-Car Average Transaction Price

The average transaction price used is $30,702. The average transaction price was calculated by subtracting the TrueCar incentive forecast of $2,661, published June 1, 2015, from the Kelly Blue Book ATP forecast (without consumer incentives) of $33,363, published June 2, 2015.

U.S. Median Household Income

The median household income used is $54,578. 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 May index is from the April 2015 Current Population Survey and was derived and published by Sentier Research, LLC on May 28, 2015.

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

The interest rate used is 4.33 percent. The interest rate is the national average 48-month interest rate for May 14, 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 May 14th can be found at

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).

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. The same population data is used for both the insurance premium and the sales tax rate.