Everyone is underwater on their car loans as values ​​decline

Every year the price of a new car Ticks ever upward. Loans He became tallerafter monthly payments Always on the riseWhich leads to An epidemic of people underwater on their loans. Now, there's a new complicating factor: used car prices are falling, which means people are getting less money for their over-leveraged trade than ever before.

a New report from Edmunds I looked at used car prices compared to deals with negative equity and found that a decline in the former led to a sharp rise in the latter. According to the report, this isn't unexpected – it's a natural progression from the lockdown-era used car boom. From Edmunds:

“There is a storm brewing in the used market as incentives and inventory continue to flow back into the new car market,” said Evan Drury, director of insights at Edmunds. “As demand for near-new cars decreases, the value of used cars declines in a similar way to what they were before the pandemic, and negative equity rears its ugly head.”

“For the past few years, consumers have been able to jump into new car loans and their trades have been protected from negative equity because some dealers, who were desperate for used inventory, were willing to pay rates close to their original purchase prices,” Drury said. “These days, consumers need to be more careful – especially if they are trading in newer cars – because near-new cars are the ones most affected by depreciation.”

As the used car market declines, new car buyers will increasingly end up needing loans. But while some may consider this bad news for new car buyers and good news for those of us searching Facebook Marketplace for trash cans, Edmunds says we shouldn't start opening bottles just yet. Things are bad for us broke bitches too.

Although the decline in used values ​​is negatively impacting a growing share of new-car owners, Edmunds analysts point out there is a bright spot for car shoppers with larger budgets. In an analysis of ATPs for 0- to 3-year-old vehicles compared to ATPs for new vehicles, Edmunds data reveals that large luxury vehicles offered an average discount of $48,111 — the largest dollar savings of all vehicle segments — with new vehicles coming in at $118,309 compared At $70,198 per use. Mainstream large SUVs also offered a notable average discount of $19,966, with new cars coming in at $76,131 compared to $56,164 for used cars.

“If you want to save big on used purchases compared to new, you still have to be willing to spend big,” said Joseph Yuen, consumer insights analyst at Edmunds. “Unfortunately, more price-sensitive consumers looking for affordable transportation will have a harder time finding discounts because the supply of older used cars is still largely constrained.”

The deals are there, but only for people looking to spend upwards of $55,000 — up to $70,000 — for large, luxury cars and the latest models. It looks like the rest of us may be stuck paying ear-earlier insurance prices forever — if we can even find the cars we want to buy.