A Staggering Amount Of Buyers Are Already In Debt On Their Trade-ins | Carscoops

      A significant 7.7% owed over $15,000 on their trade-ins, according to a recent report.

      A new study shows that more than 25% of individuals purchasing new cars are currently underwater on their trade-ins. Out of this group, 23.4% owed more than $10,000, while 7.7% owed upwards of $15,000.

      Those who included negative equity in their new loans faced an average monthly payment of $915.

      Despite predictions of economic downturn, the economy continues to progress. Nevertheless, there are emerging warning signs, with a rising number of individuals finding themselves underwater on their auto loans.

      A report from Edmunds indicated that 26.6% of trade-ins for new vehicles had negative equity in the second quarter, marking a four-year high and an increase from 23.9% the previous year.

      Further details: Car repossessions have returned to levels seen during the Great Recession, with 1.7 million vehicles being reclaimed.

      The average amount owed for those underwater was $6,754. Although this figure decreased by $126 from the first quarter, it rose by $499 compared to last year.

      The data reveals significant variability, with 32.6% of underwater trade-ins having negative equity between $5,000 and $10,000, while 23.4% owed over $10,000, and 7.7% more than $15,000.

      The concerning trends continue, as borrowers who incorporated negative equity into their new loans experienced an average monthly payment of $915, which is a record high for that demographic and $159 above the overall industry average of $756. Furthermore, these borrowers financed $12,145 more than the average new car buyer.

      Edmunds suggests that financial illiteracy may contribute to this issue, advising consumers to "check their loan payoff amount against their vehicle’s current trade-in value to determine if they’re underwater." The adage "knowing is half the battle" applies here.

      Joseph Yoon from Edmunds noted, “If you’re considering replacing your vehicle but still have an existing loan, it’s crucial to assess your financial situation before making a decision. Often, keeping your current vehicle and staying on top of payments and maintenance may be the smart choice.” However, if getting a new car is necessary, he recommends choosing one that aligns with your budget and requirements.