America’s Pandemic Car Bubble Is Now Trapping Buyers in Debt

[XS22J8R]

Keep in mind during the pandemic used car prices went through the roof and their prices seemed to inflate at even higher a % then new cars, and inventory was very low.
It was a bad time to buy a car new or used, but some have no choice if their car got stolen or totaled.
Others felt flush with cash from being locked up at home not being able to go out and spend on vacations and restaurants and such, and getting stimulus checks helicoptered on them by the government. So it felt like a great time to get a new car.
So I’m not going to crap on those who bought new cars then too heavily.
I wanted to buy a 3/4 ton Ram in ‘21 and found little to nothing I was interested in among dealer late model used inventory. Not much too exciting in new inventory either.
A guy on one of the other forums is a retired Chrysler guy, and gets some friends and family discounts. He offered his spare ones, and kindly gave one to me. I ordered a Ram, and financed about 50% of the out the door price when it arrived.
Interest rates were still cheap then, I think I was just under 3%. For the first year or two of ownership, I might have even been able to sell my truck at a profit.
I paid extra each month and paid it off in approximately 1-1/2 years.
If I have any criticism of these underwater car owners, it’s that they apparently didn’t make any effort over the years to pay extra on their loans to build equity and maybe even pay off their car loans.

 

[eldubb440]

paid for......... and fairly low miles oem parts in stock

 

[1 Wild R/T]

Never been interested in a new car, bought exactly one to keep Coral happy... I prefer my cars be from the 60's & early 70's...

 

[Dennis H]

The HC (2020) and 300C (2023) have outstanding resale value. I don’t care. Pay cash and keep em for a while.
Looked at a Genesis. Resale in toilet by comparison. I can piss money away with ease, but not that way.

 

[62Dodge_]

Howdy all
I've bought two new cars in my life both were work cars reimbursed by Ricoh and Xerox. The last personal car that I bought on payments was our 09 SRT Charger a friend needed to get out of their payments fast. And I told my wife to meet them at our bank and do the paperwork. Then after a few months paid it off. As for new cars /trucks there isn't any that I would want to own.

 

[cr8crshr - Bill]

I read that same article over the weekend. It always boils down to this: Needs and Wants. It seems "I Want" is always the catalyst that gets one into an expensive new vehicle. and underwater with the outrageous monthly payments that they can barely keep up with. Add to that the rising costs to insure said vehicle, and it's no wonder that this is the current trend these days. I prefer the "Needs" aspect over the "Wants". It may take a bit of searching, but they are out there for a fraction of the cost. I have always bought used vehicles and so far been able to pay them off in no time, and have the resources to fix them if needed. Warrenties are OK if the factory one is still there, but those aftermarket ones are nothing but a scam ponzi scheme to add more $$$ to the note when buying used. Nope is always my answer when I am in the F and I department, and yet it is till pushed at every opportunity. Both my current vehicles are a 2010 with 137k on the clock, and a 2013 with 87k. Both are maintained and well taken care of, and also garaged. Plus, I do not drive as much as I used to, so that is also a plus...cr8crshr/Bill

 

[68BabyBlue]

When I was still with my corporate employer, I worked with a dispatcher who had been a Chevy salesman earlier in his career. He told me he used to close a sale of a new Corvette on a monthly basis, the high mark for the dealership where he worked. He said he never sold one to a buyer who could truly afford the car.

 

[Mopar Hunter]

I work with a guy that bought a used 2018 Ford 150, his payment is 800+ a month. He knows he’s underwater. He trades the trucks in every year or so.

 

[Budnicks]

Predatory lending, took off, wasn't policed very well at all
giving people loans for expensive cars, that most can't afford it,
those that didn't have the proper income or credit rating either...

Thanks to the previous people in charge of economics/or CEOs raising prices
the costs of new cars & trucks especially skyrocketed...

5 year loan on a $50k with very lil' down is like having a damn mortgage
not many cars were selling for less,
most cars coupes or sedans were like $60k+, unless it was a crapbox
big trucks/pick-ups were $60K++, into $100k+
most working stiffs that's a stretch for them to afford it
especially with almost nothing down, leases weren't much better
& you don't own it even after the 36-48 months

Insurance costs of $60k to $100k rigs isn't cheap either,
another $100 a month on top of it, if you have a clean driving record
registration is $500-$800+ a year in some states too
not to even speak of the maintenance costs or fuel costs $4+ a gal at that time

or now far more expensive electricity for EVs, didn't make that an great option
or the extra expenses adding 220vlt or 440vlt service or another whole panel
especially if it's not a newer home, just for charging stations
was crazy expensive to add on top of, the unsafe EVs, tire wear/insurance etc.
let alone them burning to the ground & parking restrictions, didn't help
'it's a loser's proposition'

There weren't enough 'reliable trustworthy used cars' (not collector cars)
to accommodate the masses, for daily drivers,
many dealerships were begging for trade ins/used cars they could sell
or the glut of the powers to be pushing "not reliable, very expensive EVs"
especially after the 2019 -2022 plandemic

 

[taylor382]

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The average amount a borrower with negative equity carries on a vehicle has jumped more than 40% since 2021​

April 25, 2026

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About a third of Americans trading in an older car have negative equity.

Doug Horner has seen plenty of customers walk into his northeast Ohio Mercedes-Benz dealership who owe more on their trade-ins than those cars are worth. But being $40,000 underwater on a pickup truck is a scary sign of a growing trend.

A prospective buyer recently sought to trade in a Ford F-150 Lightning for a Mercedes GLE Coupe, but that potential customer owed about $87,000 on the pickup truck. Horner estimates the Ford pickup truck was worth about $47,000—leaving the buyer well underwater.

“This is a battle that we’re fighting every day,” Horner said in an interview.

More Americans turning in their cars to buy new ones are encountering a difficult reality: Their vehicles aren’t worth what they owe.

About 30% of borrowers in the first quarter who traded in a car to buy a new one had negative equity, whereby they owe more on their loan than their car is worth, according to car-shopping website Edmunds. Those borrowers owed about $7,200 on average before getting a new loan, a 42% jump compared with the same period five years prior.

“The higher it goes, the chances are that people are never going to get themselves out of the situation,” said Jessica Caldwell, head of insights at Edmunds.

About a third of Americans trading in an older car have negative equity, which has been typical in the industry for years. But the average amount Americans are underwater has skyrocketed, Edmunds said, as buyers try to unload cars bought during the pandemic at high prices.

The increased level of negative equity represents another strain on an auto market already under pressure from pricey vehicles and elevated interest rates.

To offset those costs, more car buyers are taking on longer loan terms to keep monthly payments digestible. In the first quarter, the average loan was 70 months on new cars, according to Edmunds data. Car payments in excess of $1,000 are no longer uncommon and can stretch out more than eight years.

But consumers who are underwater on their loan end up paying more on average after rolling over the negative equity into their next car, compounding their debt even more.

The current situation dates to the pandemic’s semiconductor supply crunch, which led to a severe shortage of new cars available on dealer lots. Vehicle prices soared in response, and buyers—who either had the disposable income to spend or lacked other transit options during lockdowns—were willing to pay up.

“You had a lot of dealerships in the Covid era that were overcharging, to say the least,” said Eric Frehsée, president of the Tamaroff Group in the Detroit area. “You’re seeing a lot of those cars coming back and there’s a lot of negative equity because of that.” Frehsée said that his dealerships opted not to charge over sticker prices during the pandemic.

In 2026, buyers with negative equity financed an average of nearly $56,000 for a new car in the first quarter, about $12,000 more than the typical new-vehicle buyer, Edmunds said. That translates to a monthly payment averaging $932 for negative-equity borrowers, the highest level ever recorded. In April 2021, the average new car cost about $41,000.

At the same time, the situation reflects another sign of the current K-shaped economy, where affluent individuals are thriving while others struggle. Even with the increased level of negative equity, the average trade-in equity for a car in March exceeded $6,800, according to JD Power.

“The average consumer is in a good position when buying a vehicle,” said Tyson Jominy, JD Power’s senior vice president of data and analytics. Borrowers with negative equity, however, can have a difficult time securing a loan for a new car, and it could put them at greater risk of falling behind on their payments, studies show.

Consumers who rolled over negative equity from a prior vehicle loan were more than twice as likely to wind up having their car repossessed within two years, compared with those who netted money on a trade-in, a 2024 study from the Consumer Financial Protection Bureau found.

More borrowers have been defaulting on their loan payments, which typically results in a repossession. Default rates on car loans in March rose to the highest levels seen since 2010, according to Cox Automotive, an industry-research firm.

The auto industry has already been grappling with the potential woes of higher gas prices because of the war in Iran. Auto executives have said they don’t expect sales to be significantly affected by the conflict unless it continues for months.

Caldwell said that higher negative equity amounts are likely to persist in coming months. Amid the pandemic and the semiconductor crisis, interest rates rose, she said, meaning borrowers have continued to pay higher costs to take on new car loans.

“We know that people paid an increased price either way,” she said. “I don’t think it’s going to go back down.”

http://[URL]https://www.wsj.com/bus...cfcd031?st=hWh4Dm&reflink=article_email_share

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Being $40k underwater on a truck is insane. People are taking on massive loans just to keep up, and with interest rates where they are, it’s becoming a hole that’s almost impossible to climb out of.

 

[Dennis H]

Poor Bastards! I thought I was under water during the Carter years. God Bless the poor people.

 

[68BabyBlue]

Poor Bastards! I thought I was under water during the Carter years. God Bless the poor people.

Interesting period in our history. I crushed it with my first truck, but I got crushed with a real estate investment. I’ll tell the story at Carlisle, if you want to hear it.

 

[YY1]

None of my houses or other real estate has had an $800 payment.

In fact, every one has been less than $500.

Of course, those are appreciating assets.....

Hard to do that now, though.

Last one was 2015, and we almost pulled the trigger on one in 2022 but the numbers were WAY off our comfort zone.

Probably should have, as stuff has doubled (again) since then.

 

[Fran B]

I'm on my last car, 2014 Toyota Avalon 32,000 bought new. Only an accident will make me buy another car.

 

[AR67GTX]

I had the occasion to drive my Brothers 2004 Toyota 4Runner last week that passed 300,000 miles a few months ago. Original powertrain still running and driving great except for an occasional light shimmy at times that indicated it needs a little suspension work. Everything seems to work. Seats still look and feel virtually like new. Paint started failing some years ago but no rust. Hard to beat an old Toyota for years of reliable service.

 

[GOLDMYN]

2017 Ram Big Horn, bought new, cash, never driven in winter, 42K miles, taken it with me

 

[RemCharger]

I had the occasion to drive my Brothers 2004 Toyota 4Runner last week that passed 300,000 miles a few months ago. Original powertrain still running and driving great except for an occasional light shimmy at times that indicated it needs a little suspension work. Everything seems to work. Seats still look and feel virtually like new. Paint started failing some years ago but no rust. Hard to beat an old Toyota for years of reliable service.

My wife has an 04 as well, with about 440km, ( roughly 275mi). The body is great, and burns about exactly zero drops of oil between changes. The 4.0L is truly the highest grade of engineering marvels. These gen 4s are considered the best runner by runner enthusiasts across the board.

 

[JackR]

Wife has a new 2026 car with no payments. Yesterday she had a conversation with kids sister in law who has the same car but a year older. She said her payments were over $800.00. Yikes.

 

[Dennis H]

Wife has a new 2026 car with no payments. Yesterday she had a conversation with kids sister in law who has the same car but a year older. She said her payments were over $800.00. Yikes.

Only downside is the 10:99. 84k HC required well over 100k to be moved.

 

[GrabberOrange69]

I buy new, then drive them until the wheels fall off. I don't like inheriting others problems. I also target the manufacturers "0% for 60" financing deals. 3 of my last 4 new cars were bought that way. Its like paying cash, but better. Our newest car is wife's 2021 Nissan (on a 0% for 60 loan). Our 4 driver cars are 2007, 2014, 2016, and 2021.