More Trade-Ins Pulled Underwater As Negative Equity Level Rises | The Truth About Cars
As more consumers trade-in their old vehicles for a newer model, a
growing number of consumers are owing more on their trade-in than their
vehicle’s actual worth.
Automotive News reports a rise in negative equity among trade-ins
beginning in Q3 2011 according to information from the Power Information
Network. At that time, 22 percent of trade-ins were upside down;
however, by Q1 2014, ***the percentage reached 27.3 percent*** after
hitting 25.9 percent and 23.6 percent in the first quarters of 2013 and
2012, respectively.
The cause? ***Longer loan terms of 73 TO 84 MONTHS (and now, beyond),
increased subprime borrowing, and declining values in the used-car
market as negative equity takes hold.***
Regarding the aforementioned loan terms, ***Experian Automotive said
the loans were the fastest growing category in Q4 2013 compared to the
previous year, taking 20.1 percent of the new-car market and 23 percent
of used-car retail volume*** in comparison to 19 percent and 12.5
percent respectively in Q4 2012.
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