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  • William Maley
    William Maley

    By William Maley •

    More Consumers Find Themselves 'Upside Down' On Trade-Ins

      A number of factors play into this

    A record number of consumers are finding themselves 'underwater' when it comes time to trade-in their vehicle - the vehicle is worth less than what they owe on their loan.

    The Detroit Free Press cites a study done by Edmunds revealing that in the second quarter of this year, 32 percent or nearly one-third of vehicles being traded in fall into the 'underwater' category. This isn't good news for consumers since the difference is tacked on to the new vehicle they had their eye on.

     To put this in perspective, the previous high was 29.2% in 2006, around the time where the housing market was reaching its cresting point.

    “There’s been a lot of water building behind this dam for some time because of higher transaction prices, lower down payments and long-term loans," said Greg McBride, chief analyst with Bankrate.com.

    "It’s problematic for the consumer because there’s no foolproof way to eliminate his financial exposure. If the car gets stolen, is totaled or you get new car envy while you’re upside down then it’s a big problem."

    • In October, the average transaction price of a new car was $34,663 according to Kelly Blue Book.
    • The average length of a new car loan hovers around 68 months according to Experian Automotive. This rises to 72 months if it's a subprime buyer - someone whose credit score is below the low 600s.

    Not helping matters is the amount of vehicles being returned from leases, flooding the used car marketplace. This increase is causing dealers not willing to spend a lot of money at auction.

    Source: Detroit Free Press

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    G. David Felt
    5 minutes ago, A Horse With No Name said:

    ....and keep people from moving back in with mom and dad when they turn 26....

    I have mixed feelings about this as my son once he finished college moved out and never looked back. Successful Graphic designer and loves his life, productive and works fine.

    My daughter also successful as a Benefits HR employee at Tommy Bahama but still lives at home. Has a great relationship with her mom and me and over all productive and successful as she pays her own way. 

    We have have many discussions and she does not see the need to move out. She pays her own way, loves hanging out with us when she does not work out or hang with her friends. 

    I think it really depends on the example set by the parents. You can have kids at home or out that are very successful or you can have kids that suck you dry and cause nothing but problems for you.

    Really depends on how you raise them.

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    A Horse With No Name
    2 minutes ago, dfelt said:

    I have mixed feelings about this as my son once he finished college moved out and never looked back. Successful Graphic designer and loves his life, productive and works fine.

    My daughter also successful as a Benefits HR employee at Tommy Bahama but still lives at home. Has a great relationship with her mom and me and over all productive and successful as she pays her own way. 

    We have have many discussions and she does not see the need to move out. She pays her own way, loves hanging out with us when she does not work out or hang with her friends. 

    I think it really depends on the example set by the parents. You can have kids at home or out that are very successful or you can have kids that suck you dry and cause nothing but problems for you.

    Really depends on how you raise them.

    My son lives at home (my 23 year old) because he is saving money for a house.

    I have no problem with them living at home, I have a problem with them doing so because they have no other choice.

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    G. David Felt
    6 minutes ago, A Horse With No Name said:

    My son lives at home (my 23 year old) because he is saving money for a house.

    I have no problem with them living at home, I have a problem with them doing so because they have no other choice.

    agree, as long as people are productive and earning an income that supports themselves and pays the bills, if they choose to live with parents because they have longer plans, more power to them. My daughter is also saving for her own house while living with us.

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