How on earth can people just keep rolling over debt like this. What does it say about the state of the US economy:
Roughly 30% of borrowers who traded in a car to purchase a new one during the first quarter had negative equity, the report said, citing data from car-shopping website Edmunds. Those borrowers owed around $7,200 on average before getting a new loan, a 42% increase compared with the same period five years ago.
It is kind of like a perpetual car lease.
On a side note, people who rent their living quarters also face continual monthly payments.
DB2
The problem seems to be getting worse. It looks a bit like the old housing boom. At least with houses there is a chance the price may go up - vehicles almost never.
It won’t end well.
70% of American’s buy a used vs a new car. The average spend on a used car is around $25k. The debt held or rolling over of it is the behavior of a segment of the population but not necessarily indicative of what most do.
If 30% of new buyers are trading negative equity, it amounts to about 9% of all car buyers.
Being “upside down” (having negative equity, where you owe more than the vehicle is worth) is a significant issue in the UK, particularly due to the heavy reliance on Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements. While precise, aggregated UK-wide negative equity debt figures are difficult to pinpoint, the market dynamics and available data highlight a widespread problem. [1, 2, 3]
Why Negative Equity is High in the UK
Industry Trends and Context
Could you tell me:What type of finance you have (e.g., PCP or HP)?How much you still owe on the agreement?The age and model of your car?I can help you evaluate your options, such as settling the shortfall or waiting out the contract.
AI responses may include mistakes.
[1] https://www.independent.co.uk/news/consumers-b2841625.html
[2] https://www.youtube.com/watch?v=ppuAC1o9qy0
[3] https://www.youtube.com/watch?v=ImofBpffjt8
[4] https://www.carmoola.co.uk/blog/negative-equity-car-finance
[5] https://autohome.co.uk/blog/the-true-cost-of-owning-a-car-in-the-uk-2026-guide/
[6] https://www.keyscalesford.com/blogs/3760/negative-equity-vehicle-trade-in
[7] Refinance or Roll Over a Car Loan? What's Best For Me? - Concept Car Credit
[8] https://diamondcu.org/blog/upside-down-auto-loan/
[9] https://www.selinafinance.co.uk/products/heloc-home-equity-line-of-credit
[10] https://www.carwow.co.uk/guides/buying/negative-equity-in-car-finance
[12] https://www.john-clark.co.uk/hub/knowledge-centre/what-is-car-finance/
[13] https://www.wsj.com/business/autos/car-owners-debt-negative-equity-3cfcd031
It looks like a growing problem to me, however it’s nothing like the size of the subprime crisis
The automotive industry has focused for years on monthly payments rather than the total cost of a car, and now it’s time to pay the price. Americans owe about $1.7 trillion on auto loans, and the number of vehicle repossessions has returned to levels last seen during the Great Recession of 2007–2009. Lenders are increasingly seizing vehicles from borrowers who simply cannot meet their financial obligations. The responsibility for this does not lie with the repossession industry, financial institutions, or irresponsible buyers.
The Chinese are in worse shape.
Mr. Google,
The severity of “upside down” (negative equity) car loans in China is primarily driven by the brutal and prolonged auto price war. As automakers slash sticker prices on both new EVs and gas cars, older vehicle values have plummeted, leaving many recent buyers owing significantly more than their car is worth. [1, 2, 3, 4, 5]
The negative equity crisis in China’s auto market is characterized by several key factors:
If you’re interested in the auto sector, let me know if you would like to explore:The impact on Chinese auto dealerships and their profitabilityCurrent data on default rates in China’s auto finance sectorComparisons between the Chinese and US auto loan marketsLet me know what you’d like to dive into.
AI responses may include mistakes.
[1] https://finance.yahoo.com/news/china-scraps-mandates-down-payments-083329210.html
[4] https://cleantechnica.com/2026/06/19/yup-chinas-ev-price-war-was-brutal-but-it-drove-innovation/
[5] https://www.nbcnews.com/world/asia/china-fears-grow-ev-financial-crisis-pricing-war-rcna212245
[6] https://finance.yahoo.com/economy/articles/chinas-ev-price-war-crushed-033200826.html
[10] https://mexicobusiness.news/automotive/news/china-car-market-sees-8-year-loans-subsidies-fade
[13] https://www.autonews.com/china/china-readies-rule-lower-down-payments-car-loans/
[14] https://www.kenresearch.com/china-auto-loan-market
[15] https://www.youtube.com/watch?v=Lv0yXL7FcRU
[16] https://www.autonews.com/manufacturing/automakers/ane-china-cost-cut-ban-price-war-0213/
That economy just seems to keep going no matter what. I expected a collapse after Evergrand et al.
It’s 9% of car purchasers. In addition, it doesn’t account for buyers where the negative equity is not an issue. Personally, I know people that do very well that constantly need a new car and often run into negative equity issues. It’s a poor financial decision but it’s not a sign of a larger looming crisis.
Some of this in my mind is a resetting based on higher but more normalized interest rates. Buyers are having to allocate more of the payment to interest servicing when rates are 7% vs 2%.
I’m from the UK and I don’t think that this happens much (if anytime) here. I’d never really noticed this before and it struck me as very odd.
That could be a key a difference and something more unique to the US. There is also here a kind of a “car culture” where it is a way for some to project a kind of image about success.
There may also be easier credit terms in the US. You may be able to shed more light on what the UK markets allow in terms of borrowing. We have 6 and 7 year loan terms which keeps payments lower but exacerbates the negative equity issue.
Most car loans in the UK are for 36 - 48 months. I’m no expert, but I can’t see that anyone going to get another loan for a car while still having an outstanding debt on an existing car would get much joy.
Isn’t it normal to have negative equity in your car, as it normally depreciates quicker than the amortization schedule? That is, if you borrow the entire amount of the purchase.
You would think it would cause great angst for someone. As the saying goes, people that don’t understand interest pay it, and those that do, earn it. But, this ongoing rollover of debt is not the dominant behavior in the US by car buyers, I guess is my point.
The thing that I found strange was the ability to roll this from one car to the other - most odd to me.
Good point to make about understanding interest.
A young member of my family is very bright and is just doing her first year at university (history). She hasn’t a clue about finance and didn’t know what compound interest was.
In the US, we have a similar problem with financial illiteracy. Of all the the things that are covered in public education, it is one of the areas where there is little focus. I was fortunate or unfortunate to have parents that struggled with debt. It was a valuable lesson in the consequences of certain financial decisions, which I vowed never to repeat.
I was a finance manager prior to retirement. Even 20 years ago, there were some ( about 5%) of my customers with negative equity. The truly exceptional credit customers got truly massive advances. One in particular got a seven year loan advanced at 152% equity against list. Truly an outlier, hence the memory. 110 to 120% of list was not an unusual loa, even then.
Jk
In my experience, the entire sales approach seems to be to centered on what one can afford on a monthly basis rather than the absolute cost of the vehicle and or what it may be worth in the future.
This. 