Car Buyers Increasingly Owe More Than Their Vehicles Are Worth as Interest Rates Rise | The Messenger
High school and college students, picture this: Imagine you’ve just bought a car, excited to hit the road and enjoy the freedom it offers. But then, you realize you owe more money on the car than it’s worth. “negative equity” is becoming increasingly common for car buyers, causing financial stress for many. In November, the average negative equity for car buyers reached $6,054, the highest level since April 2020. This is a concerning trend, especially when combined with high interest rates and falling car values.
The issue revolves around the rising costs of vehicles and historically high-interest rates on car loans. The average interest rate for a new car loan was 7.03%, and for used cars, it was a staggering 11.35% in the third quarter of 2023. Meanwhile, car values, especially used cars, have declined in the past year after a surge during the COVID-19 pandemic. This means many Americans are paying for cars that lose value over time.
Imagine being in the shoes of someone like Sandra Rivas, who makes hefty monthly payments on a car loan with a 14% interest rate, only to find herself $5,000 underwater on her 2018 Toyota Camry Hybrid. It raises important questions about personal finance, financial planning, and the impact of economic factors on everyday life……….
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Rising Dough
How can individuals make informed financial decisions when buying a car in a high-interest-rate environment, and what strategies can help them avoid negative equity situations that may lead to financial stress?
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