“We saw some rare (price) increases as consumers bought these expensive cars,” said Daniel Ross of Canadian Black Book in regards to the auto market in the course of the pandemic years.
The pandemic caused supply chain disruptions around the globe, reducing inventories within the auto market, and combined with high consumer demand, auto prices rose, Ross said.
Some of those problems have now normalized, causing prices to fall, but some consumers owe more on their auto loan than the automotive is currently value. This is known as negative equity, or being “underwater.”
Like the overwhelming majority of vehicles, they’re a depreciating asset, so anyone who bought their automotive when prices were high will “continue to lose a lot of value because it was probably overpriced at the time,” Ross said.
Should you trade in your automotive for a less expensive one?
On average, the negative equity value of the automotive of people that were underwater rose to a record $6,255 within the second quarter of this yr, in comparison with $4,487 within the second quarter of 2022, based on a July report from auto trading platform Edmunds.
The variety of trade-ins with negative equity also increased, Edmunds said in its report.
“When you’re in a negative equity position, it’s not easy to get out of it,” Ross said.
For drivers in this case, it might be higher to wreck the automotive and easily proceed paying off the loan, he said.
