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.
A bit more info on the bank worker.
“This is the case for Sandra Rivas, who’s about $5,000 underwater on the loan for her 2018 Toyota Camry Hybrid. The 38 year old, who works for a bank in San Antonio, rolled over about $4,500 in negative equity when she exchanged her prior car for the hybrid in September 2022.”
I don’t believe that.
We had bought a new vehicle with Ford 0% financing; paying outright didn't make any sense at the time. Then we saw that diversity was so strong, it totaled our vehicle....besides insurance is something other people buy.....and bothering to even hit your brakes is for someone who cares.
Luckily it was during the covid ridiculousness.....so even finding a car we wanted was a PITA.
All sarcasm aside - the 'car crunch' meant the insurance paid higher than Edmunds' and KBB's highest price for the vehicle, so we didn't take a bath on it.
But, we had to settle for a lesser vehicle than we had.
One of my daughters has a 2007 Nissan Altima hybrid, paid off long ago. It’s her daily driver 17 years later and she has no plans of changing to another car. Says she’ll hand it over to her daughter (now 11) when she begins driving. Says if it gets her from A to B, why not keep it until it falls apart. She’s driven it across the country multiple times between California, Iowa, Kansas and Texas. She makes good money (6-figure), doesn’t like interest. Younger people than her need to live within their means.
Here comes the next bailout, after student loans.
That’s part of the plan, starting with Cash For Clunkers, make personal transportation unaffordable to force people into “15-Minute Cities.”
This post right here!!!! Needs repeating over and over again!! Most responding to this thread are not truly understanding what is reality and you placed it into numbers MOST are experiencing. It’s as if I’m reading responses where we here at FR are the one gaslighting and that truth is not truth. Your post makes very evident how completely screwed the working man is. Some time ago one year of wages at middle income could cover the entire cost of a new car. Not anymore. You know it’s bad when banks now float loans on vehicles at 7 years…7 freaking years for a car or truck! When a third of your check is used to cover a new truck or half for most you know there a big problem
You have a smart daughter.
I did briefly explain it to him, and he actually mentioned it seems like a good way to get a better credit score, too - so he learned a lot in a couple of minutes.
(He knew what interest was, just didn't put it together with paying off a CC every month).
I just bought a VERY nice ‘03 Chrysler 300M. $6k, 90k miles, It’s like new.
Yes, I think so. Hope my granddaughter (her daughter) is frugal when she's grown. Another of my daughters has a 2005 Mustang she's driven since new. She's in Iowa and can afford a new car, but she will also drive the old one until it falls apart. She and her husband bought a used Jeep Cherokee about ten years ago because of driving their kids around. I wonder if they'll ever buy a newer car. Her husband drives a 1966 Chevelle he has owned for decades. They're all about being frugal when spending money.
Last summer I bought a 2018 Toyota truck with 45K miles. Got it for $48K. Paid cash for it. It had been babied by the previous owner. I plan on keeping it for 20 years or when I am put in the ground.
My husband has been in the car business for over fifty years. His clientele is almost all repeat customers and referrals. During COVID and even after there has been limited availability,parts and the dreaded “chip” shortage. Many new cars were selling for “over sticker” prices and used car prices were ridiculous. He cautioned people about buying unless they absolutely had to because they would be grossly upside down when the market corrected. This is no joke, high profile SUVS were selling anywhere from 20k to 50k over sticker.
I know a Lexus dealer manager. He can’t believe the number of poeple that are buying cars and taking out the high interest loans.
All the while I have never bought a new vehicle for myself. You dont miss what you dont know.
It is nice not having any car payments and being able to pay cash for the next one. My guess is the banker lady is going to have even more negative equity added to on her current loan. Playing around with numbers suggest she took out a 6 year loan on the 2018 Camary hybrid
Here's where this old man shows his age. Back in the 1960's new cars were going for $2000 to $3000, and that seemed so expensive. I owned many used cars back then, and bought them for anywhere from $12 to $300. Yes, $12, bought cars at police auctions. Bid on them, won the bid, dropped in a battery and some gas, and drove off the police yard. Other times I purchased from strangers, buying cars for $50 to $100. I would drive them for a while, then sell them for more than what I paid (I often made them better before selling). My wife, at the age of 20, bought a new car fully loaded with options for $2500 in 1973 - for cash. I preferred old cars, and didn't buy a new one until 1981 - for cash.
We have always paid cash for new cars, saving up a nest egg to cover the cost. Car dealerships don't like that but want the sale. I'd rather save up money ahead of buying, instead of having to pay interest which doubles the cost of a car. The only times we got a loan on cars is when they offered zero interest plans over 3 years, which is a sweet deal. My sister often said to me that if she had my money, she would buy a Jaguar or Mercedes. Nope, that kind of thinking led her to bankruptcy and being poor. I buy modestly and under my means. Buy smart and it feels nice not being in debt.
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