Some cities in the United States spend way more on cars than they can afford.
There’s no denying that most cities in the United States rely on cars for residents to get around. If you don’t have a car you often have trouble finding work, or going to school, or even just getting groceries.
But affording a car is its own struggle. According to the Federal Reserve Bank of New York’s most recent report on household and credit card debt, car loan debt has grown significantly over the past six years. The overall auto-loan debt ballooned to over $23 billion in the third quarter of 2017. That’s a lot.
Considering that car sales fell in 2017 for the first time since the housing market crash eight years ago, analysts are growing concerned that auto-loan debt might be the new subprime mortgage.
But some cities are worse than others. WalletHub, a website that focuses on teaching financial literacy and improving personal finances, recently released a report that showed the worst cities in America when it comes to car loan debt.
To find out which cities are the worst for buying cars they can’t afford, Wallethub compared the median auto-loan debt level to the average annual income in over 2500 cities across the US. What they found is, perhaps unsurprisingly, poor rural areas have the worst ratio of debt to income, while affluent urban areas have the least.
At number one on the list of worst cities for car debt is Lake Placid Florida with a debt-to-income ratio of 89 percent. The median auto-loan debt was $17,023, while annual income was $19,153. That means there’s a lot of people barely able to afford a car in Lake Placid.
In second place is San Juan Texas with $23,110 median car loan debt and annual income of $28,811, or about 80 percent debt-to-income ratio. Third place was also in Texas at Rio Grande City, with $25,186 median debt and $31,591 annual income, again roughly 80 percent debt-to-income ratio.
Just in case you were wondering where all the car-rich people live, they're in Scarsdale and Bronxville New York, where the average auto debt is $11,676 and $10,373 but the average annual income is $185,106 and $150,388 respectively.
You’ll also note that the most car-poor places also have no public transport, requiring their residents to buy a car in order to get to work. It’s a pretty raw deal.