After a brief respite from soaring auto debt, Americans are once again falling deeply underwater on their car loans.
Used-car values have tumbled about 16% from the pandemic-driven peaks of early last year, according to the Manheim Used Vehicle Value Index, and negative equity — the amount that debt exceeds a vehicle’s value — has been climbing fast.
Among new car buyers, those carrying negative equity on their trade-ins were underwater by an average of $5,820 in September. That’s compared to a low of less than $4,100 in late 2021, according to automotive information firm Edmunds.
While it’s not unusual for motorists to accrue negative equity, the long-term trend has been exacerbated by low down payments and the emergence of six- and seven-year loan terms. Drivers got a measure of relief when a topsy-turvy auto market sent used-car values soaring during the pandemic, and some motorists discovered their vehicles were worth more than they had paid for them.
Historically, around half of new-vehicle buyers trade in a car, and just shy of a fifth of those trade-ins actually carry negative equity, Edmunds data show.
Even though only a sliver of US car buyers arrive at dealerships with trade-ins that are underwater, the rise is creating headaches for dealers and would-be car buyers alike — rolling negative equity into a new loan can be difficult if the amount owed is too high.
In the Columbus, Ohio, area, dealer Rick Ricart was accustomed to seeing only a couple of shoppers on any given weekend day with $10,000 or more in negative equity. On one Saturday in late August, though, he counted 10 customers facing that scenario.
Getting someone like that into a car “is not impossible,” Ricart said. “But is the customer comfortable with a payment that could go up hundreds of dollars due to interest rates, and the negative equity that has to be rolled into it?”
- SEO Powered Content & PR Distribution. Get Amplified Today.
- PlatoData.Network Vertical Generative Ai. Empower Yourself. Access Here.
- PlatoAiStream. Web3 Intelligence. Knowledge Amplified. Access Here.
- PlatoESG. Carbon, CleanTech, Energy, Environment, Solar, Waste Management. Access Here.
- PlatoHealth. Biotech and Clinical Trials Intelligence. Access Here.
- Source: https://www.autoblog.com/2023/10/08/underwater-trade-ins-are-costing-new-car-buyers-almost-6000/
- :has
- :is
- :not
- $UP
- 000
- 1
- 10
- 100
- 11
- 2021
- 820
- a
- About
- According
- actually
- again
- alike
- almost
- Americans
- amount
- an
- and
- any
- ARE
- AREA
- around
- At
- AUGUST
- auto
- automotive
- average
- BE
- been
- buyers
- by
- CAN
- car
- carry
- carrying
- Climbing
- comfortable
- compared
- could
- counted
- Couple
- Creating
- customer
- Customers
- data
- day
- dealer
- Debt
- difficult
- discovered
- dollars
- down
- drivers
- due
- during
- Early
- Elm
- emergence
- equity
- exceeds
- facing
- Falling
- FAST
- fifth
- Firm
- For
- from
- given
- Go
- got
- had
- Half
- Have
- he
- headaches
- High
- HTTPS
- Hundreds
- if
- impossible
- in
- index
- information
- interest
- Interest Rates
- into
- IT
- just
- Last
- Last Year
- Late
- less
- like
- loan
- long-term
- Low
- Market
- measure
- more
- negative
- New
- of
- Ohio
- on
- once
- ONE
- only
- or
- owed
- paid
- pandemic
- payment
- payments
- plato
- Plato Data Intelligence
- PlatoData
- PoS
- Rates
- relief
- Rise
- Rolled
- Rolling
- Said
- saturday
- scenario
- SEC
- seeing
- sent
- September
- Shoppers
- show
- soaring
- some
- Someone
- terms
- than
- that
- The
- their
- Them
- they
- those
- though?
- to
- too
- Trend
- underwater
- unusual
- used
- value
- Values
- vehicle
- Vehicles
- was
- weekend
- were
- when
- with
- worth
- Yahoo
- year
- zephyrnet