All articles tagged with #negative equity
A growing number of U.S. car owners are underwater on their auto loans, with over 25% of trade-ins in negative equity, leading to higher monthly payments and potential debt cycles, driven by high car prices and loan rates, according to Edmunds.
A car salesman warns against other dealership employees interfering with ongoing sales, highlighting a case where a receptionist's attempt to lower a customer's payment led to the customer leaving, illustrating the importance of respecting sales boundaries and the impact of negative equity and inflation on car buying decisions.
As used car prices continue to fall, more people are finding themselves underwater on their car loans, with the value of their trade-ins not covering the remaining debt. This trend is particularly affecting newer vehicles, as the depreciation is hitting them the hardest. While there are significant discounts available for luxury and large mainstream vehicles, those seeking more affordable transportation may struggle to find similar savings due to restricted supply. Overall, the current market conditions are making it challenging for many consumers to find good deals on both new and used cars.
While more cars are becoming available and prices are stabilizing, potential buyers are facing challenges in obtaining auto loans. The rejection rate for auto loans has risen to its highest level since 2013, with lenders becoming cautious due to borrowers' struggles with inflation, interest rate surges, and increasing debt. The market for auto financing is experiencing a rise in delinquency and default rates, leading to concerns about negative equity. Many lenders have scaled back or eliminated auto lending, further limiting options for consumers and potentially increasing interest rates. To navigate these challenges, consumers are advised to consider alternative financing options and be mindful of the overall cost of the loan, including the APR.
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.