Cars parked in the parking lot of a Chevrolet dealership on June 20, 2024 in Chicago, Illinois. CDK Global, a provider of software that helps dealers manage sales and services, suffered a cyber attack that paralyzed workflow at about 15,000 dealers in the United States and Canada.
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DETROIT — A growing number of Americans with auto loans owe more on their vehicles than their vehicles are worth, according to a report Tuesday from Edmunds.com.
Automotive data and consumer research company Report average The amount owed on so-called upside-down loans climbed to a record high of $6,458 in the third quarter. This compares to $6,255 in the previous quarter and $5,808 in the same period last year.
An auto loan inversion isn’t necessarily scary in and of itself, but the growing number of consumers getting into trouble is another sign of the pressure on U.S. consumers.
Signs of this tension emerged last month, when Fed According to reports, as of the end of 2023, auto loan delinquency rates were significantly higher than pre-coronavirus pandemic levels.
Edmunds’ Jessica Caldwell said: “It’s not the end of the world for consumers to owe a pound or two more than the car is worth, but seeing such a large percentage It’s really shocking to see an individual affected by $10,000 or even $15,000.
Edmunds reports that more than one in five consumers with negative equity owe more than $10,000 on their car loans. Among them, 22% of car owners with negative equity owe $10,000 or more, and 7.5% have negative equity of more than $15,000.
Consumers can cope with auto loan inversions by holding on to their vehicles for longer. Edmonds said they should also ensure regular maintenance to avoid further decline in value and cost.
“With prices and interest rates so high, it’s critical that consumers not only think about their monthly payments but also be honest about their own ownership habits,” said Ivan Drury, Edmunds director of insights. “If you know you’re not The kind of person who holds on to a vehicle for the long term, then a seven-year car loan is a one-way ticket to negative equity. “
The current loan inversion is largely due to consumers purchasing new vehicles in 2021 and 2022 while inventory is low due to the coronavirus pandemic and parts shortages. Many subsequently paid full price or more, and their vehicles depreciated faster than expected as the auto industry and inventories normalized.
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