A study by Edmunds found that a quarter of US residents who own a car still owe a significant amount of money to the bank. Analysts estimate that in just a year and a half, the number of transactions with negative equity has increased from 18.5% to 24.2%, meaning many Americans have started selling their cars at a loss and have been forced to pay extra out of pocket to pay off the loan.
Car loan debt has reached a historic high of an average of $6,458, and the problem of losses when replacing a car affects every segment from compact crossovers to full-size pickup trucks. About 22% of Americans owe at least $10,000 on their loan, and 7.5% owe more than $15,000, and these are net losses that cannot be covered by selling the car.
Experts explain the situation as a bad time to buy: during the coronavirus pandemic and immediately after it, there was a shortage of microchips, cars were sold significantly above the recommended retail price, and now these same customers are suffering due to the low trade-in price. In addition, many Americans take out “long-term“ loans, but sell the car early, which also leads to losses.
Analysts advise to approach loans carefully and not to be tempted by a low monthly payment, because a seven-year car loan will almost certainly not be profitable if you have to change the car early. By American standards, the prime interest rate is high: currently it is five percent.