More Car Owners Are Upside Down on Loans

The Wall Street Journal calls attention to a new stat from CarEdge that often winds up having unpleasant results for car owners: About one-third of people with loans on their vehicle owe more than it's worth. Meaning, if the car gets totaled, they have to continue making payments for a vehicle that doesn't exist. It's the result of a dramatic decline in used-car prices in recent years, the Journal explains. CarEdge, an auto marketplace site, notes that the problem of underwater loans particularly affects people who have taken them out since 2022.

As an example: Say a person bought a pricey new car last year with financing, but that car got totaled in an accident or, perhaps, by a falling tree in a hurricane. Their insurance company gives them a settlement that ends up being less than what they still owe on the loan—and they are on the hook for the remainder. Of note: Owners of electric vehicles are disproportionately affected: Roughly 46% of EV owners surveyed had "negative equity" on their loans. As this affects more and more drivers, the "issue is poised to become a major challenge for car owners and the auto industry alike," per the auto site. (More auto industry stories.)