Repo men are going to be busy this summer.
via automoblog:
Early signs of a negative equity surge in the auto loans sector have begun to emerge in the first quarter of 2023. According to data from Edmunds, the average negative equity value of auto trade-ins was $5,341 in Q4 2022, up 29% from the previous year. The number of vehicle sales that involved a trade-in with negative equity also jumped by 17% over the same period.
These trends are two of several that are spurring concerns within the automotive and finance industries. A sudden, dramatic increase in negative equity could put countless borrowers in dire financial circumstances and have a ripple effect throughout the financial industry.
What is Negative Equity?
Negative equity is when the amount owed on a vehicle exceeds the value of the vehicle. For example, if a person owes $20,000 on a car that is worth $12,500, the vehicle has $7,500 in negative equity. Also known as being “underwater” on a loan, holding negative equity is a risky financial position for a borrower to be in. It can also lower a person’s credit score….
h/t Simian_Stacker