Home Economy Edmunds: 25% of All Trade-ins Underwater in Q3 2016

Edmunds: 25% of All Trade-ins Underwater in Q3 2016

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Bright colors and lowered prices try to attract customers to a California used car lot

California used car lotThe United States auto industry underwent an auto lending boom in recent years. Consumers maintained $1.1 trillion in auto loan debt at the end of Q2 2016, leading to fears of default rates increasing.

Used automobile prices rose to $19,200 on average in the third-quarter, up 4.3% on the year. The final quarter of the year is expected to push the average retail value of used vehicles over the $20,000 mark.

Consumers are buying autos with an average 4-year-old age, down from 4.3-year-old vehicles a year prior. Average automobile prices are on the rise, with premium SUV prices up 12.5% on the year.

Edmunds’ report points to a record number of consumers trading in vehicles with negative equity. The report shows that 25% of all trade-ins during Q3 2016 had negative equity.

The WSJ states that in the first three quarters of the year, 32% of all trade-ins had negative equity. The figure is up from 22% in 2011. The average negative equity was $4,832. The data shows consumers spending, on average, $33,000 for a new vehicle.

Loan rollovers are over 100% due to the loan, including the negative equity. Higher monthly payments or longer payback periods are increasing, too. Edmunds states the average payback period is 69 months, up from 63 months in 2011.

A rising loan amount and negative equity rolled into auto loans puts a higher risk on loans for auto lenders. Lenders face a higher risk of default as loan amounts reach $505 per month for new autos and $428 per month for leases. The average used car loan payment is up $3 on the quarter to $378.

Leasing numbers are on the rise, too.

Total used vehicles reached 9.75 million in Q3 2016, but franchise used vehicle sales decreased 2.6% year over year.

Nearly one-third of all auto loan trade-ins are underwater. The lowest underwater figure was 13.9% in 2009. The previous high was in 2006 when 29.2% of auto loans were underwater. Longer loan periods allow consumers to pay lower monthly payments.

Longer loans lead to buyer’s equity in the vehicle increasing at a slower rate. Vehicles are depreciating at a higher rate than the owner’s equity is growing, resulting in a higher risk of default for loan providers.

Moody’s expressed mild concern over the growing negative equity trend. Fitch, a credit agency, reported a 5.05% rise in 60-day delinquencies on auto loans. Delinquencies rose 13% in July month-over-month and 17% on the year.

Delinquency rates on subprime auto loans rose 22% year over year in August.

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Jacob Maslow
Online Marketing Consultant at Consultwebs
 Jacob Maslow offers clients effective digital marketing insights that enhance website visibility and improve SEO as an online marketing consultant at Consultwebs. His approach marries creativity to numbers to show significant ROI for marketing efforts. This Brooklyn native has spent years helping skilled professionals, including medical and legal professionals rank for relevant search terms.
Clients attain their marketing objectives with Maslow. He has helped boutique law practices in crowded markets rank No. 1 in Google ranking. His efforts doubled the revenue for Allergy Be Gone's non-Amazon sales to $4 million annually. SEO ranking and revenue growth are prioritized when Maslow consults with prospects and long-term clients. Maslow has over a decade of experience implementing SEO practices and running successful marketing campaigns.
In addition to working with clients in various fields, but often with those in legal, financial and medical areas, he is an author, offering his expertise to those seeking to improve their engagement with online audiences. Read what Maslow has to share with eager audiences on business.com and business2community.com, including recent articles: "4 Mistakes You Can Correct Today to Be a Social Media Superstar" and "6 Things SEO Can't Do for Your Business."
Maslow puts his connections to work for clients. He founded many news sites including: Forex Binary News; eThailand; Key Investing; Rapid News Network and StreetWise Journal. Jacob Maslow stays busy as owner of Legal Scoops, Daily Forex Report, Investing Alerts and bestportablechargerz. Feel free to seek his advice on Facebook, Quora and Slideshare or contact Jacob Maslow directly.
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 Jacob Maslow offers clients effective digital marketing insights that enhance website visibility and improve SEO as an online marketing consultant at Consultwebs. His approach marries creativity to numbers to show significant ROI for marketing efforts. This Brooklyn native has spent years helping skilled professionals, including medical and legal professionals rank for relevant search terms. Clients attain their marketing objectives with Maslow. He has helped boutique law practices in crowded markets rank No. 1 in Google ranking. His efforts doubled the revenue for Allergy Be Gone's non-Amazon sales to $4 million annually. SEO ranking and revenue growth are prioritized when Maslow consults with prospects and long-term clients. Maslow has over a decade of experience implementing SEO practices and running successful marketing campaigns. In addition to working with clients in various fields, but often with those in legal, financial and medical areas, he is an author, offering his expertise to those seeking to improve their engagement with online audiences. Read what Maslow has to share with eager audiences on business.com and business2community.com, including recent articles: "4 Mistakes You Can Correct Today to Be a Social Media Superstar" and "6 Things SEO Can't Do for Your Business." Maslow puts his connections to work for clients. He founded many news sites including: Forex Binary News; eThailand; Key Investing; Rapid News Network and StreetWise Journal. Jacob Maslow stays busy as owner of Legal Scoops, Daily Forex Report, Investing Alerts and bestportablechargerz. Feel free to seek his advice on Facebook, Quora and Slideshare or contact Jacob Maslow directly.

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