Americans face an auto loan crisis, with nearly 30% of used car owners owing more on their loans than their cars’ worth. This “negative equity” has created significant hurdles for car trade-ins, trapping many with vehicles they can’t afford to upgrade. According to Edmunds, the average deficit on these upside-down loans hit a record $6,458, reflecting a troubling financial strain for car buyers.
Consumers who financed new cars in 2021 and 2022—amid high prices and limited stock—now face steep depreciation. As inventory and prices normalize, many find themselves underwater, unable to trade in or pay off their loans without taking a financial hit. Instead, some buyers roll the balance into new loans, intensifying their debt burden and further complicating their finances.
The fallout has been sharp for the auto industry. Brands like Jeep, Dodge, and RAM are seeing reduced sales as fewer buyers can afford new cars. With demand shifting, automakers face pressure to adjust prices and financing options to keep pace with a changed market. The combination of inflation, depreciation, and residual debt signals a rough road ahead for both consumers and carmakers.
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