More Americans are upside down on their car loans, and the average amount they owe is at an all-time high, according to a new survey from car comparison site Edmunds.
In the three months ended in September, 24.2% of Americans who traded in their car toward a new vehicle purchase owed more on the trade-in than it was worth, which is considered “upside down” or “underwater,” Edmunds said. That’s up from 23.9% in the prior three months and 18.5% a year ago. Additionally, the amount they owed on those trade-ins climbed to a record high of $6,458, with 22% owing at least $10,000 and 7.5% owing $15,000 or more, it said.
Auto loans account for about 25% of nonmortgage consumer credit, according to the Federal Reserve, and they can provide a window into the financial health of borrowers and overall household financial well-being.
“Consumers owing a grand or two more than their cars are worth isn’t the end of the world, but seeing such a notable share of individuals affected at the $10,000 or even $15,000 level is nothing short of alarming,” said Jessica Caldwell, Edmunds’ head of insights.
Why are so many Americans underwater on car loans?
Various factors are contributing to this trend, Edmunds experts said.
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First, Americans who bought new vehicles during the inventory crunch of 2021-2022, just after the pandemic, paid peak prices, Caldwell said. They “paid over MSRP (manufacturer’s suggested retail price), so they didn’t…
