Wall Street journal has published article stating the average negative equity on for traded cars in 2026 is $7200.
This jumped 40% since 2021.
This jumped 40% since 2021.
Negative equity
- Thread starter andrew_j
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this information is near worthless without farther qualifying it or more background
Is there an article somewhere?
If the average is -7200 is that the average of just negative equity trade ins
ie impulse buyers etc?
I can see a possible "how that happens" go buy ford truck for 80k finance it at 1200 a month for 84 months
then trade in at 2 years?
Average car price has probably jumped 25% in the same time period so 40% might not be as big as the headlines indicate.
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With most things financial, it's only negative if you sell. Unless a huge deposit is put down or a cash purchase is exercised, I'd say every single new car that drives off a car lot has negative equity. It only matters if the owner tries to sell the asset for which he owes more that it's worth. Pay it down or pay it off and it's never an issue.
Guy at work is on his 3rd high trim level 2500 Silverado Duramax in the 6 years that I have worked here. I don't get it.
I read the same article, and while it’s sensational, it’s not surprising. People are willing to spend far too much of their money on cars. It’s foolish on the surface but even more foolish as you peel back the layers.
The big flaw that I see in the discussion, and in that article, is the treatment of cars as assets, so that you have “equity”.
I don’t add cars into any net worth calculation, they are a cost, and a depreciating asset. Period. A necessary expense and little more.
While the negative “equity” may be unrealized, making the payments continues to bleed cash, so by the time you “realize” your positive “equity”, you’ve spent a ton of money and ended up with very little. It’s a negative return.
Nobody ever got rich buying a new car and watching it depreciate as they drove it.
The collector car market is an entirely different discussion, and tangential to the article.
The big flaw that I see in the discussion, and in that article, is the treatment of cars as assets, so that you have “equity”.
I don’t add cars into any net worth calculation, they are a cost, and a depreciating asset. Period. A necessary expense and little more.
While the negative “equity” may be unrealized, making the payments continues to bleed cash, so by the time you “realize” your positive “equity”, you’ve spent a ton of money and ended up with very little. It’s a negative return.
Nobody ever got rich buying a new car and watching it depreciate as they drove it.
The collector car market is an entirely different discussion, and tangential to the article.
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LOL. People like you (and I) are trying to crash the economy. If everyone stopped buying things on credit, a brand new recession or worse would start. I did buy a new car 10 years ago, still have it and I paid cash.
You beat me to it, good on ya!
The article says that around 30% of those looking to finance a replacement vehicle had negative equity in their current ride and that the average deficit was $7200.00 for that group of buyers. An anecdote involving a guy who had 40K+ in negative equity in his Ford truck was mentioned.
It would obviously make more sense for these people to simply continue with their current vehicles, to pay them off and then to enjoy at least a few years of payment free driving, but not everyone thinks that way. Whether the vehicle suits their use well or not, they simply have to tough it out and make better choices when they are able to do so without borrowing more money to pay off their current loan.
This is partly a matter of insane vehicle retail pricing during the pandemic years but mainly a matter of poor personal financial planning and decision making.
I buy new cars every time. I don't want someone else's unmaintained turd wagon. I also keep my cars well past what one would consider relatively new. My daughter and her husband both went down the "latest and greatest" road when they first got married. Both ended up taking a beating in doing so. Luckily, he graduated engineering school and she's a nurse practitioner so they got out of it, many don't. Of course, this was after her enclave that she owed way more on than it was worth blew a transmission. She paid cash for the fix and paid that loan off in a year.
At this point I think the worst thing for the car market is insurance and this is why car companies are getting into the insurance game.
For example I pay more for insurance than I do for my lease payment on my Tesla. People may be able to afford a new car but when insurance doubles their payment it’s a problem.
So car companies can do various things to make it happen. Low or zero interest financing is one thing and has real value and is why new is typically a better deal than used. But they can also subsidize insurance. Tesla Insurance is one most people have heard of but in some states there is GM Insurance, Toyota insurance, etc.
I get that in theory if you can’t afford the car you can’t afford the car but people don’t think that way. Most people want to the latest and greatest tech and features and it’s what makes the economy go around.
If everyone was smart with money the entire world would basically collapse.
For example I pay more for insurance than I do for my lease payment on my Tesla. People may be able to afford a new car but when insurance doubles their payment it’s a problem.
So car companies can do various things to make it happen. Low or zero interest financing is one thing and has real value and is why new is typically a better deal than used. But they can also subsidize insurance. Tesla Insurance is one most people have heard of but in some states there is GM Insurance, Toyota insurance, etc.
I get that in theory if you can’t afford the car you can’t afford the car but people don’t think that way. Most people want to the latest and greatest tech and features and it’s what makes the economy go around.
If everyone was smart with money the entire world would basically collapse.
I think the shock of it is that buyers are rolling negative equity from one bad decision into the exorbitant price of another. Its not really predatory lending, but financial mis-management. I'm no financial wiz, but I'm shocked at what people do and feel comfortable with.
But in a way we need people to do it. Sometimes it’s crazy but it makes the world’s economy function.
Dealers got greedy starting in 2021 and consumers were dumb enough to go through on purchases many thousands over MSRP with 84 month loans. People are now stuck in those vehicles and I hope stealerships suffer the consequences of their actions.
slo town
$200 Site Donor 2026
It's all smoke and mirrors. Most of the world's economy is built on debt. Only 11% of the world's "money" actually exists. The rest is debt.
Scott
As attributed to PT Barnum "There's a sucker born every minute".
The world's economy would be a lot more stable without the debt house of cards upon which it currently depends.
That is amazing - in a bad way. I get soooo much satisfaction from driving around vehicles that are fully paid off. With the average car payment at $1000, if you're talking two cars, that's $24k per year you save by paying it off and keeping it in the fleet.
Nah. You simply take on more debt to make the payments on your existing debt.
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Yeah, just borrow more to cover the interest and keep refinancing the balance.
This game will work until it doesn't.
What happens if the dollar is displaced as the world's reserve currency?
The trend is already evident so we may find out.
I don’t include our vehicle values in our net worth assessment. To me that’s like including the food in your pantry as part of your assets. Vehicles are liabilities. But they should not be over leveraged. Carrying negative equity on vehicles is rarely a good idea and should be avoided. But if you must get GAP insurance.
I’m not entirely certain we could maintain the current population of the western world without debt. Buying a house or car or going to college would be virtually unattainable for the vast majority of the population in the US without it. And it’s significantly easier for individuals to live debt free vs entire nations.
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