Posted on 12/18/2023 10:14:13 AM PST by george76
Buyers with negative equity on their loans owe more than $6,000
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Car-loan borrowers are under pressure as interest rates climb and the value of their vehicles tumble. And things are getting worse for those who owe more than their cars are worth.
Car buyers with so-called negative equity were underwater by an average of $6,054 in November, the highest figure since April 2020,
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Average negative equity was $5,300 in 2019.
“We're in this situation where combined with the cost of the vehicles being so high and the interest rates being so historically high, you have a lot of people who are in bad car loans,
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The average interest rate for a car loan was 7.03% for new cars and 11.35% for used cars in the third quarter of 2023
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Car values, particularly used car values, have dropped in the past year
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Americans with car loans are paying for depreciating assets,
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Sandra Rivas, who is 38 and works for a bank in San Antonio,.. is $5,000 underwater on a 2018 Toyota Camry Hybrid and is tired of making $648 monthly payments on a loan with a 14% interest rate.
Not in today’s market. Price a new or even a used car at today’s interest rates and you’ll be shocked what the monthly payments are
Indeed. That just doesn't happen.
I was going to say, I know interest rates skyrocketed, but who pays 14% on their vehicle purchase?
An idiot with horrible credit.
yup, and you’d be wrong...
Yep, we paid cash for both my car and my wife’s. However, that’s not an option for a lot of buyers. Prices for a decent used car are sky high, often close to new car prices.
What does a younger person do who actually needs daily transportation, who just wants a good car to drive and doesn’t care about the latest and greatest?
I read where the cheapest 2024 Ford F150 with no options is $38,500, and good luck finding one with no options. The Chevy Silverado is priced the same. What does a guy who actually needs a work truck do these days?
It’s just a bad situation, never thought I’d see entry level full size American pickups at $40K prices.
The last new car I bought was a 1965 Ford.
It is a common to have gap insurance for this but as the car gets older it becomes unavailable. So for many when you need the insurance the most you can’t get it. So a lot of people end up making payments on a car months after it was totaled in an accident. Don’t be that person
The average new car price is almost $50K. The average new car loan rate is now over 7% (5% - 14% depending on your credit). To afford a new car (along with their skyrocketing mortgages, rent, groceries and gas), many buyers now get 6, 7 or 8-year car loans.
Monthly payments for a $50K car at 7% for six years are $852 per month. At the end of the first year, you still owe over $43K. You still owe $35,600 at the end of the second year and $27,600 at the end of the third.
If you calculate the same loan terms over seven years (though generally you have to pay a higher rate for a longer loan) you get payments of $755 per month. At the end of the first year, you still owe $44,263. You still owe over $38,110 at the end of the second year, and over $32,500 at the end of the third.
Meanwhile, on average, new cars depreciate 20% the first year and 15% each of the next four years. That $50K new car will be worth only $40K after one year, $34K after two years, and $29K after three. So, you will be under water over two years with a 6-year loan and over 3 years with a 7-year loan.
Thanks Brandon. Why don't the sheeple realize how great Bidenomics has been?
Stupid thread. So a guy bought a car a few years ago with a 2% interest rate. What’s the big deal?
PAID OFF MY USED BUICK IN 1984.
STILL DRIVING IT.
If people put a down payment on a car , then their loan balance should be less than than the value of the car, so they would avoid being upside down on a car loan.
I drive a 10-year-old truck that I bought used. My wife drives a 20-year-old Lincoln that we bought used. I am always on the lookout for used cars with low mileage that I can buy cheaply for cash, usually from estates. We haven’t purchased a new vehicle in over 20 years.
A new vehicle will lose at least 20 percent of its original value in the first twelve months, so it needs to be a down payment of at least 20% or you will still be upside down at the end of the first year.
True. But in most cases people are upside down un my experience. Not many people do a big down payment.
I’m glad Mrs. Chandler insisted we pay cash for our last car. I didn’t get the car of my dreams, but I didn’t get payments, either.
The nice thing about paying cash is the seller has no leverage over you.
I 15 year-old Camry with a good maintenance record is still a dependable car.
I realize that an 18-year-old beginning work at a bank would not understand the workings of interest rates. But that woman is 38 and doesn't understand! Stupid people do stupid things, and are too stupid to realize why they are poor. Many of them are content to use a credit card at 22 to 28 percent interest, pay the minimum charge on their balance, and are puzzled that the balance doesn't go down.
One of the first things I taught my kids is how interest rates work, and to try to pay down principal in order to pay off loans. One of my daughters is a bank manager and owes no money on her home or cars; she understands how interest works and has taught her kids like I taught her.
HA! I walked into a bank branch to pay my VISA bill (save a stamp), had a check for the full amount (always) of, like $348 - so the teller (maybe 22 yo) says "min payment is only $40 - why is your check for $348"?
Because I don't pay interest.
"Um, what do you mean"?
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