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Wednesday, November 16, 2016

A Record 25% Of Used Car Trade-Ins Are Underwater

We have frequently written about the unsustainable trends in new car sales in the United States created by the combination of lower rates, loosening underwriting standards and voracious demand for new securitizations by wall street and pension funds that will do just about anything for an extra 20bps of yield.

Today, we find that Edmunds' "Q3 2016 Used Vehicle Market Report" reveals that many of the same problems also afflict the used auto market. The most startling takeaway from the report is that the percentage of used cars being traded in with negative equity values continues to spike and currently stands at an all-time high 25%. Moreover, the average balance of the negative equity also continues to rise and stood at $3,635 for Q3 2016, up from roughly $2,750 in Q3 2011.

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3 comments:

Anonymous said...

The Fed is to blame.

Monetary inflation, and interest rate suppression has led to all sorts of distortions in our economy.

Anonymous said...

Because the auto industry is slimy and has never cleaned up its act. They really do not care whether you can pay off your loan or not, because it never comes back to them. And a 10 year loan on a car is ridiculous.

Their practices have always been the root of consumer default.

I have no respect for anyone in the auto industry. Liars and thieves, every single one of them.

Not Quite Understanding said...

And to top it off, I do not see any real savings in purchasing a one or two-year-old vehicle. It seems that any half-way decent vehicle with low mileage is sold for very-near-new prices, minus the warranty. I'll just buy a new one, at least it will smell new for a while.