Home Economy More Americans are underwater on their auto loans as used car values dip

More Americans are underwater on their auto loans as used car values dip

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(NewsNation) — Used car values are down from their pandemic-era highs and now more Americans are finding themselves underwater on their auto loans, owing more than their vehicle is worth.

Nearly one in four consumers who financed a new vehicle with a trade-in were upside down on their prior loan in the second quarter of 2024 — the highest level since the beginning of 2021, according to Edmunds.

Those who were underwater on their loans also owed more than ever before, $6,255 on average, up 40% from two years ago.


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“Over the last few years, inflated vehicle trade-in values kept consumers somewhat shielded from falling underwater on their car loans,” Jessica Caldwell, Edmunds’ head of insights, said in a statement. “As the market continues to correct and trade-in values normalize, this protection is falling away.”

EV owners who were upside down had especially high negative equity, $10,326 on average. That accelerated depreciation is partially because EVs are “laden with emerging technology” and incentives are pushing more people toward new EVs, the report noted.

The average age for trade-ins with negative equity has also increased to 3.7 years old, up from 3.2 in 2022. It’s a trend that underscores the fact that those who paid inflated prices during the pandemic are at extended risk of falling underwater and may need to keep their cars longer.


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Negative equity is mainly a concern when you trade in a vehicle too soon so your best bet is to hold on to your car as long as possible and keep up with maintenance, Edmunds said.

The share of upside-down loans is up compared to recent years but still lower than the second quarter of 2020 when they surged to over 37%.

For buyers, lower used car prices will come as welcome news. As of May, the average price of a used car was $31,791, down 8% compared with a year earlier, according to CoPilot, an app that tracks new and used car values.

Even so, the cost of buying and owning a car is much higher now than before the pandemic. Used car prices are up by a third, almost $8,000, since March 2020, per CoPilot. Car insurance and maintenance costs also shot up in recent years.

In total, Americans owe more than $1.6 trillion in auto loan debt, which is $400 billion more than their outstanding credit card debt.

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