Car debt is pilling up for consumers who opt to take out larger, longer loans to finance vehicles. New and used car prices and interest rates are up from a year ago, raising payments for buyers, some of whom are paying over $1,000 a month. As a result, people are increasingly upside down on their vehicles, owning more than the cars are worth.
To alleviate some pressure from high car payments, people are trading in vehicles and rolling over up to $10,000 of negative equity into a new auto loan. Many dealers happily accommodate these consumers because it allows them to rake in profits on financing and credit products like gap insurance. However, industry experts warn that even without a recession this year, consumers are increasingly at higher risk of defaulting on their loans.
