Inside the Underwater Car Loan Epidemic

This month, the CNBC website published more bad news about American consumers and their car loans.  We already knew that vehicle prices are beyond almost everyone’s budgets, but good luck getting to work in Florida without a car.  Likewise, we already knew that, even when we work around the clock, and our job and our gigs add up to more than $100,000 per year, it is barely enough to afford the minimum payments on their debts; you don’t need money dysmorphia or Girl Math to end up in a financial situation where you are charging your groceries on buy now pay later (BNPL).  According to a new report on the CNBC website, an increasing number of vehicle owners have negative equity on their car loans; this means that the amount owed to pay off the loan exceeds the resale value of the car, which is another way of saying that the car loan is underwater.  Owing more money on your car than it is worth sounds scary, but it is only a problem if you are trying to sell your car and get a new one.  For help strategizing about ways to free up funds to pay down debts, including your car loan debt, contact a Miami debt lawyer.

How Do Vehicle Owners Get Negative Equity, and Is It Always Cause for Alarm?

Getting negative equity in your car can happen more easily than you might imagine.  In fact, nearly a quarter of vehicle trade ins thus far in 2024 have been cars where the owner had negative equity.  Several factors contribute to make 2024 the perfect storm for underwater car loans.  The fact that cars depreciate quickly in value is nothing new; your high school economics teacher probably told you that a new car loses half of its value the minute you drive it out of the dealership lot.  What is different now is that cars are so expensive that most people have to finance them over a loan term of five years or longer.  This means that the interest piles up more quickly than you can pay down the principal.  Even if you make all your payments on time and do not incur late fees, you can end up with negative equity after the first year, which is bad news for people who are in the habit of trading in gently used cars for new ones.

What to Do If Your Car Loan Is Underwater

If your car loan is underwater, the simplest solution is to stay the course.  Keep making payments, however small, until the remaining balance on the loan is less than or equal to the resale value of the car.  If this will take years and you are eager to trade in the car, a debt consolidation loan could help you pay down your car loan to where you can put a sizable down payment on your next vehicle.

Work With a Debt Lawyer About Car Loan Debt

A South Florida debt lawyer can help you address your debt problems if you own negative equity in your car.  Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.

Source:

cnbc.com/2024/10/15/american-consumers-are-increasingly-underwater-on-their-car-loans.html