These 8 Texas Cities Make Top Ten List for Overpaying for Vehicles

Plenty of us, in certain parts of the country, are spending way too much money on our vehicles according to the latest study by WalletHub, and it's a serious issue for people who live in multiple towns in Texas.

Last year was an excellent year for the sale of cars as the industry saw an 11% increase in the amount of vehicles sold which is great news! The auto industry, just like other industries, needed a comeback following the economic downturn because of COVID-19.

The flip side of the story is that some people who have bought vehicles in the last several years have overextended based on their debt-to-income ratio. As WalletHub looked at the numbers eight cities in Texas had the most overspending if you are looking at the median cost of vehicles and the median gross income of buyers.

How Much of Your Salary Should You Spend to Buy a Car?

Depending on which expert you talk to the guidelines for how much of your annual salary you should spend on a car payment varies. MarketWatch says it should be between 10% and 15% while New Trader U suggests that most people follow the 20/3/8 which is the following,

..... a down payment of at least 20% of the car’s price, limiting the loan term to three years and ensuring that your car payment does not exceed 8% of your monthly income.

There is also the 20/4/7 rule. Roots Financial Planning financial planner Robbie Morris says you make at least a 20% down payment on the vehicle you purchase. He says never take a loan for four years, and the monthly payments should never exceed 7% of your gross income.

Any of the above plans can be extremely difficult to follow if you don't make much and you need a car to get to work. Inflation is a serious concern to anyone having to make purchases or debt payments, and that is most people. For most, the struggle is real.

Here is WalletHub's Top Ten List of Cities Where People Overspend the Most on Cars in 2024:

1. Rio Grande City, TX
2. Donna, TX
3. Mercedes, TX
4. San Juan, TX
5. San Benito, TX
6. Jacksonville TX
7. Tolleson, AZ
8. Brownsville, TX
9. Willis, TX
10. Bastrop, LA

When taking into consideration all of the car sales in Rio Grande, Texas, experts at WalletHub say their stats show that the median cost of debt for a vehicle is $30,418 while the median salary is $31,186. WalletHub says it's one of the criteria that gave Rio Grande, Texas such a low ranking when it comes to "Money Management Skills of Cities".

Rio Grande, Texas is obviously not alone. WalletHub Analyst Cassandra Happe had the following to say,

Many Americans are overspending on cars: in over 200 cities, the average resident's auto loan debt is the equivalent of half or more of their yearly income. Residents dealing with these expensive loans on top of debt from credit cards, personal loans, student loans, and mortgages are at risk of falling behind on payments and having their vehicles repossessed.

Here's a quick overview from WalletHub: