{"id":87185,"date":"2026-04-30T06:15:41","date_gmt":"2026-04-30T06:15:41","guid":{"rendered":"https:\/\/diyhaven858.wasmer.app\/index.php\/americans-are-embracing-this-terrible-car-buying-habit-its-costing-them-thousands-of-dollars\/"},"modified":"2026-04-30T06:15:41","modified_gmt":"2026-04-30T06:15:41","slug":"americans-are-embracing-this-terrible-car-buying-habit-its-costing-them-thousands-of-dollars","status":"publish","type":"post","link":"https:\/\/diyhaven858.wasmer.app\/index.php\/americans-are-embracing-this-terrible-car-buying-habit-its-costing-them-thousands-of-dollars\/","title":{"rendered":"Americans are embracing this terrible car-buying habit. It\u2019s costing them thousands of dollars."},"content":{"rendered":"
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<\/div>\n<\/div>Car loans keep getting longer as prices rise \u2014 and it\u2019s costing drivers thousands of dollars more when they trade in their vehicles. – MarketWatch photo illustration\/iStockphoto <\/figcaption><\/figure>\n
Car buyers have been stretching out their loan terms to lower their monthly payments as prices for new vehicles have crept up in the last few years \u2014 with the average new-car price now approaching $50,000 and most new-car loans being six years or longer.<\/p>\n
Most Read from MarketWatch <\/h3>\n
This practice, however, is catching up with many drivers: Nearly 31% of vehicle trade-ins now carry negative equity, meaning the amount owed on the loan is more than the car is worth. (That amount can be paid off, offset by trade-in offers or rolled into the loan for the new car.) The share of trade-ins that are underwater is now at a five-year high as used-car values have cooled from their postpandemic highs, according to research from the car-buying site Edmunds. The uptick comes as the ongoing costs of car ownership, from insurance to maintenance to gas, have been on the rise.<\/p>\n
The average underwater trade-in now carries $7,183 in negative equity, according to Edmunds \u2014 with the largest share, 41%, being underwater by $5,000 or less.<\/p>\n
According to JD Power, auto loans with terms of 72 months represented 40.5% of car sales in March, while those 84 months or longer were 12.8%.<\/p>\n
\u201cOne of the side effects of this is that equity in the vehicle builds more slowly,\u201d which can be a costly move for those who are used to trading in their cars every three to four years, said Michael Sommer, founder of Alaminos Wealth Planning.<\/p>\n
With loan terms this long, \u201cit\u2019s just not something you can dig your way out [quickly] of unless you pay off the entire car,\u201d Ivan Drury, director of insights at Edmunds, told MarketWatch. \u201cThe only thing that saved people in prior years from not being so upside down is simply that used[-car] values were so much higher [after the pandemic].\u201d<\/p>\n
Related: <\/b>Cars were once a financial engine of America\u2019s middle class. Now they\u2019re a \u2018wealth killer.\u2019<\/p>\n
Amplifying the problem is the fact that supply-chain issues in 2022 led car buyers to pay more than the suggested retail price. Owners looking to trade in those vehicles now may face steeper-than-normal declines in value due to the inflated prices they paid at the time of purchase.<\/p>\n
It\u2019s a risk, especially when consumers roll over that amount into the loan for their next car, which makes the negative-equity problem worse by making the new loan larger. Car owners who roll over negative equity tend to have \u201clower credit scores, lower household income, longer loan terms and [are] more likely to have a co-borrower than consumers with no trade-in or a positive-equity trade-in,\u201d according to a 2024 analysis of auto-finance data by the Consumer Financial Protection Bureau. They are also \u201cmore likely to have their account assigned to repossession within two years.\u201d<\/p>\n<\/p><\/div>\n