"Negative Equity Storm: How to Protect Your Used Car Investment"
Drivers who took on auto loans at high interest rates and paid sky-high prices for cars could face some headaches down the road as car values pull back in an economic slowdown. Negative equity — or owing more on your car than it's worth — is building, particularly in used cars bought by subprime borrowers. The auto industry pays close attention to loan-to-value ratios — the difference between the loan amount and the market value of the car. The higher the number, the more vulnerable the consumer. As vehicle values have declined in recent quarters, used car loan-to-value ratios at origination have trended upward.