To treat the affordability of cars, we recommend using the sources below:
1/ To calculate the personal loan (calculator): https://economiapertutti.bancaditalia.it/calcolatori/personal-loan-calculator/
2/ The World averages to know about the lending interest rates:
3/ The below statement to benchmark the affordability of the car:
“An affordable car is regarded as one that costs 10-15% of a person's annual income, including its re-payments and other expenses3.”
The introduction shall explain why it is relevant and important to address the affordability of cars. It should try to answer the following questions:
Why are cars important for society?
What is the relevance of hardware in people’s daily lives? Does it allow self-expression, well-being, productivity, mobility?
“Automobiles have a vast impact on shaping the economy2. Owning a car offers privacy, safety, time flexibility, and a means to avoid exposure risk during health emergencies2. A car is more of a necessity in the US, and owning one is considered a lifetime investment2. An affordable car is regarded as one that costs 10-15% of a person's annual income, including its re-payments and other expenses3.
Compared to a decade ago, a new car/truck now costs 38% more, while the average transaction cost rose by 50-70%, making them unaffordable for ordinary people (working-class people)4.”
It should try to answer the following questions:
Caution: the analysis should tackle the impact in absolute terms, ideally. This might not be possible on many occasions. Therefore, the analysis should focus on the country, region, where the company has the most sold cars (largest impact).
What is the average price of the company’s cars offered?*
Insert the cost into the personal loan calculator under “loan principal amount” → here
Look at the average loan interest rate in the country under investigation here
Insert the average loan interest rate into the loan calculator under “annual interest rate” → here
Insert 72 months as the average loan term as stated in this source
Click “Calculate” to obtain a monthly instalment result
What we want to know is the cost of a car for a specific company, versus the comparison to the average cost of an affordable car.
I.e. the cheapest car costs $10,000, and on average people pay 2-3% more than the cost of the car mentioned due to loans/registration fees/etc. (ballpark figure). Together, this is more or less than the average cost of an affordable car.
On average, people end up paying X% more than it costs, i.e., “The base cost of the car + X% as this is the average amount”
If the figure does not exist, can look at a stack ranking.
Repair cost: find the average repair cost for any given company or stack ranking of the brands with the most affordable maintenance and repair costs.
After following the above first 5 steps, we obtain a $686.88 monthly instalment in the US for a car costing $44,877. (12,481)
Yearly, a person will spend $8,242.56 on instalments ($686.88*12), meaning a person buying this car spends 8.4% of its annual average income ($97,974) to afford this car. Thus, this car is in line with the definition of 10-15% provided in the introduction, rendering it affordable.
*If the average cost of the company’s cars is unavailable:
You can do this by taking 3 least expensive cars, 3 middle range cars, and 3 most expensive cars from the company
Average the above to obtain one average figure
**If the average transaction cost in a region is unavailable:
To estimate the average transaction cost in a country, look into the most sold brands in a given country/region.
Pick 3 low priced branded car costs, 3 medium, 3 high, and calculate the average.
To provide added value, look into the following:
1/ How affordable/expensive the company’s products are compared to the average car transaction cost in a country, or compared to the industry average, and/or to main competitors.
2/ What are the maintenance costs of the car (optional)?
3/ Assessing whether the average price of a car is within the 10-15% rule is important, yet it might be more expensive than close competitors and/or the national average. This means that it might still not be the cheapest option even though it is considered affordable.
Analysis Example: https://app.impaakt.com/analyses/36143/stellantis-average-car-price-is-9-percent-more-expensive-than-the-average-american-transaction-car-price