A growing number of Americans are struggling with negative equity on their car loans, owing more than their vehicles are worth. The average negative equity has surged to over $6,800, with experts warning about the potential for a cycle of poor auto financing decisions.
More Americans are finding themselves owing more on their car loans than their vehicles are worth, a phenomenon known as negative equity. According to an analysis by car shopping experts at Edmunds, nearly a quarter of vehicles traded in for new car purchases are now underwater, meaning the borrower owes more than the car is currently valued at. The average negative equity for these upside-down car loans has surged to over $6,800, with one in four borrowers owing more than $10,000.
\While negative equity isn't a new issue in the auto lending landscape, the current trend is particularly alarming. Jessica Caldwell, Edmunds' head of insights, notes that the increasing number of trade-ins with tens of thousands of dollars in negative equity creates a challenging cycle for consumers to escape. 'If you find yourself significantly underwater on your loan, your best opportunity to rise to the surface is to hold onto the vehicle while keeping up with payments and maintenance,' said Ivan Drury, Edmunds' director of insights. He emphasizes that the ramifications of trading in a vehicle well below market value for a new one can be drastic and lead to a cycle of poor auto financing decisions. \Experts advise keeping a car for as long as possible, ideally for the entire loan term, and opting for the shortest loan term feasible. Six or seven-year loans are considered too long. Auto loan debt is the second-largest category of consumer debt in the United States, trailing only mortgages. Americans owe a staggering $1.644 trillion in auto loan debt, accounting for 9.2% of total consumer debt. Bank auto loan rates showed little improvement in 2024 but are expected to rev up in 2025 as the economy strengthens, banks seek to increase loan demand, and the Federal Reserve lowers interest rates further. The average 30-year fixed mortgage rate is predicted to remain in the 6s for most of the year, with a brief spike above 7 percent but never falling below 6 percent. Rates are not expected to return to the 3-4% range anytime soon, but could settle at 6.5% by the end of the year, down from over 7% last year. Similar to the auto industry, the housing market has also faced inventory challenges, but levels are improving, offering buyers more options
AUTO LOANS NEGATIVE EQUITY DEBT FINANCING CONSUMER DEBT
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
First Responders Save Woman from Drowning After Car CrashA swift response from Norton police officers and firefighters saved a woman's life after her car crashed into Wolf Creek. The woman was trapped in her vehicle and calling for help when Sergeant Sean Conner jumped into the water to assist her.
Read more »
Things Most Americans Have That Non-Americans Find SurprisingA recent online discussion revealed some interesting differences in household items between Americans and people from other countries.
Read more »
Americans Shared Things They Wish Non-Americans Knew'I went to college with a guy from Germany, and this confused him quite a bit when he first got here.'
Read more »
Opinion: breakfast club car meets are keeping the car community aliveFrom full English to Continental, breakfast club car meets cater to all tastes
Read more »
Arkansas Stepfather Charged with Murder After Allegedly Drowning 2-Year-Old StepsonDakota Shawn Hays, 20, is accused of repeatedly throwing his 2-year-old stepson into a pool to teach him how to swim, resulting in the child's death from lack of oxygen to the brain. Hays faces murder charges, while his wife Annastacia Atkins, 24, is charged with permitting the abuse of a minor.
Read more »
Mayor Adams' Legal Defense Fund Drowning in Debt as Donations Dry UpAmidst his historic federal indictment, Mayor Eric Adams faces a growing financial crisis as his legal defense fund struggles to keep pace with mounting legal expenses. Donations have dwindled to a trickle, leaving the fund over $735,000 in debt.
Read more »