Posted on 03/03/2023 8:52:01 AM PST by dennisw
Severely Underwater on Their Car Loans Buyers owe an average amount of $5,500 on vehicle trade-ins, close to the levels they were before the pandemic.
The amount people are underwater is concerning everyone, from the drivers of the cars to the dealers who are financing these people. Bloomberg says dealers are reporting more buyers than ever rolling up to lots with $10,000 and more in negative equity looking to trade their vehicle and roll that debt into another loan.
Take one owner Bloomberg spoke with. After he realized his family needed a bigger vehicle, they did something unusual: they traded in both of their vehicles for a Ford Explorer. Including what was owed on the two cars, plus the registration and all other dealer fees, the couple ended up paying $66,000 for a $49,000 Explorer.
That family isn’t alone, either. Data from Edmunds shows that the average amount Americans owe on their auto loans is quickly approaching pre-pandemic levels. After dropping below $5,000 between April and December 2021, the average amount has started to climb again reaching $5,500 at the end of 2022. Rising vehicle prices and longer loan terms are also worrying those in the industry. But it depends on the buyer base.
Pete Kesterson, general manager of a dealership in Falls Church, Virginia worries about his Kia customers more than he does Volvo customers. Kesterson says that Volvo customers usually pay cash for their vehicles; Kia customers tend to finance more. While they’re having more sales, he’s concerned about it all coming back to haunt the economy.
“It’s going to come, and it’s going to bite us. Now, we’re selling the cars for so much more, and financing for longer, at a much higher interest rate. There are some challenges coming down the pike,” he told Bloomberg.
(Excerpt) Read more at jalopnik.com ...
Get out your Repo Man giffs and stills
Unexpected!
Well... that is totally NOT unexpected... and pickup trucks are about to be just as underwater...
Americans have had a growing tendency to keep piling on negative equity. Throw in those who bought new vehicles with COVID stimulus checks - add in the parts/chip shortages that blew up retail prices... and folks got extra stupid -
So now that interest rates are high - and car loans are harder to get (and more expensive) - and as auto values fall back down... yeah...
Does this mean there will be more used cars on the market soon? Prices are nuts right now. Greater supply should reduce prices.
But it’s not all the fault of the buyer. Some models and brands have horrible resale value, which a buyer has no control over. Other factors like dealer markups — which lenders don’t usually approve if the markup is greater than the value of the car — make things worse. If buyers continue down the path they’re on, the auto loan bubble will pop. It’s no longer a matter of if it will anymore. It’s when.
Millions of people with negaive equity.
Hmmm...
Is that the kind of equity which democrats say should be shared by blacks and hispanics and women.
Go ahead, share the equity. ;)
Not me.....all my junk is paid off.
I was thinking the same thing. Should be some late-ish model vehicles popping up for sale by banks and lending institutions soon. If there are enough of them there should be some fire sale type deals in the future.
“Does this mean there will be more used cars on the market soon? Prices are nuts right now. Greater supply should reduce prices.”
This article doesn’t mention a flood of repossessed automobiles. This would lower used car prices. This article is limited, it talks about people cruising into dealerships to buy a new car. What they have to trade in is an automobile that they still owe 5-10-whatever thousands on (negative equity)
Get out your Repo Man giffs and stills
See my tagline!
An EVs are just getting started. Choices are going to have to be made. A home mortgage, a car loan or gas and groceries. You decide. The taxpayers will take care of the kids’ college loans and their healthcare. I was reading the other day about the Student Loan Deadbeats wanting FJB to “cancel” (reneg on) their student loans so they can apply for new loans to go back to “school”. I guess they sure do miss those spring breaks.
We have no car notes. :-)
Heh, a tribute to the slimy, loathsome Kennedy family...following a long teadition of crime, ineptness, and the desire to screw anything that moved. Eff them and the turd they oozed from. Tankfully, Dead Ted is dead. And rotting. But still smelling awful.
But trading in a vehicle with an underwater loan is one of the dumbest things anyone can do.
The USS Oldsmobile (DD 455) was lost in the Battle of Chappaquiddick Bay when Captain Theordore Kennedy engaged Captain Morgan and the notorious Johnny Walker. Several shots were absorbed by Captain Kennedy before the USS Oldsmobile was lost in the battle.
There was one casualty.
A local car dealership plays a catchy tune with their TV ads: “Move ‘em up a couple years, keep the payments the same”. Yep... nothing like those 8-year car loans.
For years my mother in law’s neighbor would get one or two new cars a year. Seemed that every time we’d visit, they had a new car. I can’t imagine how upside down they were because neither have high dollar careers.
They are nice people, friends even but they seemed to live a life of economic stupidity.
They seem to have gotten over the new car fetish in recent years. Maybe they finally took a look at how much they really owed.
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