Another massive problem for the economy has emerged that President-Elect Donald Trump will be saddled with after his inauguration. Reports show that 39% of auto loans taken out while Joe Biden and Kamala Harris were in charge are now deeply underwater. Electric vehicles are in even worse shape, with 46% of owners underwater on their loans.
The auto industry was in terrible shape during the pandemic. People stopped buying new cars, especially in states that locked their citizens down for months on end and prevented them from working. By 2022, car dealerships were offering pie-in-the-sky loans to get people to make purchases. This included 84-month loan terms to keep the payments lower.
The problem is that no one who bought a car had any idea how badly Biden and Harris were going to jack up the economy. When inflation started to skyrocket, people couldn’t make their monthly payments. By November 2023, car buyers were frantically searching Google for the term, “Give car back.”
A new report from Business Intelligence shows that people who took out 84-month car loans are now 114% underwater on their loans. If you bought a $25,000 car in 2022, you would end up owing more than $53,000 on it with the higher interest rates tacked on over an 84-month period.
People who took out variable-rate loans got hit even harder after the Fed started to increase interest rates. When the cost of groceries shot through the roof, along with fuel, insurance, and everything else, people could no longer afford their car payments.
With interest rates at 7.29% on new cars right now, the auto industry is going to be in real trouble starting in 2025. People won’t be able to afford the loans on new cars until Trump manages to get inflation back under control. The question is whether the automakers can hang on that long.
