Many Americans are car poor.
A recent Edmunds report found a disturbing trend: An increasing number of consumers with auto loans had negative equity, meaning they owe more on their vehicle than it’s worth — a lot more.
As of the third quarter that ended Sept. 30, Edmunds said 24.2 percent of trade-ins applied toward a new vehicle purchase had negative equity. The average upside-down loan spiked to an all-time high of more than $6,400.
Look at the outliers. Of those with negative equity, 22 percent owed $10,000 or more, and 7.5 percent owed $15,000-plus.
If borrowers don’t have the cash to pay off the old loan, all that negative equity gets rolled into the new one. This means the next vehicle also starts with negative equity, creating an expensive cycle of debt.