for around $16,000. After including the negative equity on her trade, taxes and other fees, she financed more than $25,000 and is paying it off over seven years.
The upswing in negative equity is on the radar of officials at the U.S. Consumer Financial Protection Bureau. They are closely monitoring it now that the safety net of selling a used car to climb out of debt is disappearing. For now, even seven-year loans are performing well, said Margaret Rowe, a senior director with Fitch Group Inc. who’s focused on auto financing and asset-backed securities. But if the prices of cars stay high and lenders keep extending loan terms, opting to offer them to borrowers with lower credit scores, that could change, she said.
The market will always find balance. No matter how long it takes or how painful it is.