Americans increasingly upside down on auto loans as used car values fall

https://www.foxbusiness.com/economy...de-down-on-auto-loans-as-used-car-values-fall

HYPERLINK has full article

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the percentage of new vehicle sales that had a trade-in with negative equity jumped to 20.4%, up from 17.7% in 2022 and 14.9% in 2021...........

Now, the average amount consumers owe on upside down loans is at a record high of $6,064, up from $5,347 in fourth-quarter 2023 and $4,143 in 2021, the data found.

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Not good news. Autos (with the exception of few) are a depreciating asset. It seems like folks are just going to have to keep their vehicles running. I realize that many cannot afford a major repair but given this bad news, along with all of the other bad news (foreclosures, defaults, layoffs, tapping into 401k's etc) , it's our new reality.

Perhaps a current, elected official will step to the microphone and come clean with the folks. Your lifestyle has diminished and belt tightening must be done.

 

Hmmm, sounds like this could be....................... A BLOODBATH

 

Well, maybe this means that car prices, which have gone through the stratosphere due to the covid-induce chip shortage, will have to come down again. At least, dealers won't be able to mark up prices and will have to start offering incentives again. The dealers have had the upper hand in negotiations for too long, it's time they are brought back to earth.

 

Well... to be fair you're upside down on your auto loan the second you drive it off the lot unless you got a hell of a deal

 

It's as true now as the first time I ever heard it:

DO NOT BUY ANYTHING ON CREDIT THAT DEPRECIATES IN VALUE OVER TIME!

 

the Republican Run FED raising interest rates has not help....

 

Well, people used to pay their cars off before they traded them in, too.

But a large percentage of buyers now are rolling negative equity into new car loans, driving up the interest rate and the payment (since the negative equity is unsecured).

It appears that is now prevalent.

I only did it one time. That’s because my old Pontiac died and I needed wheels.

 

Not too many people can scrape up $40k for a new car.

 

You're right... so, they buy the car on credit, along with tons of other stuff they need -- or just WANT. Now they've got two undesirable financial situations!

The first is being in debt on a bunch of stuff (needed or optional) that simply loses more and more value every month, and the second is that they have to pay hefty interest on that amount of indebtedness. A sure-fire recipe for "debt-slavery"... and they bring it on themselves!

But, we Americans are notorious for our seeming inability to save money instead of spending it whenever we get our hands on some of it....

 

I had to buy my home and car on credit. The thing is, wealth is amassed and takes time. People save and scrimp to get by and then by the time they retire its fine. I have 8 more yrs and I will be all set when I retire. Obviously not everything went to plan, but no one is going to give me money, one has to work to get by. The US revolution, we borrowed money, if we didn't, we would still be part of the UK.

 

First, drive the car until the loan is paid off.

Second, continue to drive it an equal amount of time while paying the same payment into a savings account.

Third, buy the next car without a loan. Then you won't be a poor person subsidizing a rich banker.

 

That's actually good advice, and I would only add that people think long and hard about what kind of vehicle they buy -- and WHY they choose one over another.

Obviously, different people have vastly different requirements, but as more and more of the population continues the downward slide into insolvency, house foreclosures, and automobile repossessions, the selection of vehicles at better prices should improve considerably.

Bankers and other financiers don't like having their lots cluttered up with lots of repo's, and they'll move them just to get them off the books -- especially at a month's end, and even more so at the end of a business cycle (like the business-quarter, or the company's fiscal year).

At those times, if you can walk in with CASH, you can make amazingly good deals!

 

In particular, buying decisions should take into account the manufacturer's reputation for longevity and low maintenance costs. Not all models will last two loan terms with reasonable maintenance costs. However, many will.

The Average Car Is Now a Record 12.5 Years Old
https://www.roadandtrack.com/news/a43903366/average-car-age-12-years/

 

My lifestyle hasn't diminished.

But then I'm not dumb enough to spend 90% of take home pay on assets with diminishing value.

3 cars, none less than 13 years old, total purchase cost $3500 in 2021, $4500 in 2022, $2500 in 2023. 3 cars for less than half the cost of a single low end new car.

People make stupid decisions. Not sure how any politician can cure that.

 

Then buy a used car.

 

You're so right! And, really, a person (including me) has to use discipline and common sense in vehicle selection. Example: for years, I've wanted to buy a Mercedes 5-series -- just because. The 'ooh-ahh' factor that's attached to some cars, especially the German 'biggies' like BMW, Audi, and Mercedes is very tempting -- until you do some research and 'put a pencil to it'. Nearly all of them are MONEY PITS!

Long story short, if I were having to buy a new vehicle today, I'd look long and hard at Mazda. For decades Mazda has made pretty damned good cars that last a very long time, and don't cost jillions of dollars, either. BTW, too bad you can't buy Suzuki vehicles anymore in this country!

 

This is true, a certified used car, et al. This trend has increased the cost of used cars too. More evidence are the adds of 3rd party extended warranties.

 

This is to be expected. Used car values exploded during COVID and now they are normalizing. People who overpaid(Including myself) now have car loans that may be worth more than the car.

Which is fine, because a car is not and should not be considered an investment. Don't buy a car that you won't be happy outright owning when you're done paying it off.

 

People are trying to beat inflation by buying now. Older used cars and trucks are getting fixed, not scrapped.
The future of transportation is on the ballot. In 2030, you buy EV's, fix your old car, or walk.
If you have a ranch or farm, you are as good as Amish! You will be dragging your crop behind four horses.
How much do you think your box of cereal will cost as we embark on a program of dismantling the most efficient economy ever?

 

by the time the folks realize the harm for which they voted, it will be too late.

 

OK, show us what bills caused this to happen……

 

Car values always depreciate. A car is one of the worse investments you can make, always has been. Buy a car for reliability, not resale.

Cheaper used cars are better for first time buyers, and people trading up are both buying and selling, so they're taking the hit either way.

 

A car is not an investment, it's an expense. Maintaining that car is an investment. Keep a well maintained car for as long as it's viable unless your economic situation allows or dictates different. As for the OP, he's(?) always reticent to looks really hard at the underlying timeline and causes.

 

no mention of any bill was made. A simple statement that some current elected politician should have the courage to speak the truth that lifestyles have diminished.

 

Or an illegal alien.