Tag: upside down auto loan

Auto Loan Debt

Upside-Down Car Loans Reach All-Time High

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Nearly 1 in 4 vehicle trade-ins toward new car purchases with negative equity carry more than $10,000 in debt, according to Edmunds. The 2025 Q3 data from the online resource for automotive inventory and information, show a growing number of owners are trading in vehicles worth less than what they owe, and the debt they are rolling over is growing.

The latest data reveals:

  • More than one in four new vehicle trade-ins are underwater, a four-year high.
  • Americans with upside-down car loans owe more than ever.
  • Nearly one in three underwater car owners owe between $5,000 and $10,000 in debt — a new record high.
  • A record share of underwater car loans are carrying five-figure debt.

Rolling over debt drives higher monthly payments. To highlight the financial effect of rolling negative equity into a new vehicle purchase, Edmunds analysts compared the costs for consumers who financed a new vehicle involving a trade-in with negative equity in Q3 against the industry average for all financed new vehicles. The average monthly payment for buyers who rolled negative equity into a new loan was $907 in Q3, down slightly from Q2’s high of $915 and $140 more than the overall industry average monthly payment of $767.

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm; we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Bankruptcy Law, Credit, Debt Relief, Timothy Kingcade Posts

Higher Vehicle Costs Driving a Rise in Auto Loan Delinquencies

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The price tags on vehicles continues to the increase, which means consumers are borrowing more money to make their purchases.  This in turn is having an effect on household budgets, pushing some families to the max.  New cars now cost an average $35,000, compared to an average $31,000 in 2013, according to Edmunds.com.

The monthly payment on a new vehicle with a $31,000 outstanding loan is about $516 a month, before insurance, gas and maintenance costs are factored in.

Used vehicles have also become more expensive.  The average loan on a used car bought at a dealership costs about $21,000 and carries an average $380-a-month payment.

Credit requirements have been less strict in recent years, as banks and other lending institutions began pushing auto loans, even sub-prime loans to meet the car-buying demand.

Delinquencies in indirect auto loans- those arranged through a third party, such as an auto dealer- increased to 1.83 percent.  Delinquencies in direct auto loans- those arranged directly through a bank- increased to 1.03 percent.

Consumers have over-extended themselves in other areas as well, according to the American Bankers Association.  Delinquencies in bank credit cards rose to 2.74 percent.  Home equity lines of credit delinquencies rose to 1.11 percent.

There certainly seems to be a correlation.  Consumers with credit card debt often struggle with auto loans and mortgage loans, too.

Just like with homes, consumers can end up with upside-down car loans, where the value of the car is worth less than what they owe. This is oftentimes due to higher interest and the terms and conditions of the loan itself.  Many consumers who end up trapped in these type loans are considered to be a higher credit risk.  They oftentimes end up being sold a lower-quality car at a higher cost.

When filing for Chapter 7 bankruptcy, consumers have some leverage because the lender knows that bankruptcy gives them the option of surrendering the vehicle and canceling all liability. Banks lose a lot of money on repossessions, so they have an incentive to offer a better deal, such as reducing the principal of the loan to the vehicle’s current value.

If you have any questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Related Resources:

http://www.post-gazette.com/business/money/2017/07/10/Car-loans-delinquencies/stories/201707090086

http://www.nolo.com/legal-encyclopedia/car-chapter-7-bankruptcy-29608.html