Edmunds reposted this
Consumers who purchased a car during the height of the pandemic and are feeling some buyer’s remorse might want to think twice before trading in for a new ride. And those who bought an EV might want to think a third time. Over the last few years, inflated vehicle trade-in values kept shoppers somewhat shielded from falling underwater on their car loans, but as the market continues to correct itself, this protection is falling away. According to Edmunds data: 🙃Nearly 1 in 4 Americans (23.9%) who financed a new vehicle purchase with a trade-in during Q2 2024 were upside down on their car loan—marking the highest level Edmunds has recorded since Q1 2021 (31.9%). 💰Vehicle owners who are underwater on their car loans owe more than ever before— a record $6,255 in Q2 2024. 📈The average age for vehicle trade-ins with negative equity is on the climb: In Q2 2024 that figure increased to 3.7 years old compared to 3.4 years old in Q2 2023 and 3.2 years old in Q2 2022. But here’s the real kicker: 🔌Edmunds Q2 2024 data also shows that EV owners underwater on their car loans owe significantly more on average ($10,326) compared to owners of ICE vehicles ($6,018). A contributing factor to this higher dollar amount is the fact that the average trade-in age for EVs (2.1 years) is significantly lower than ICE vehicles (3.7 years). It’s not surprising that EV owners are feeling the brunt of accelerated levels of depreciation — this is a fairly standard occurrence for vehicles laden with emerging technology. And incentives on new EVs are only adding to the problem by further depressing used EV values. But this is not great news for the fledgling EV market, which is already struggling to gain consumer buy-in. Consumers are still trying to work out if EVs can actually fit into their lifestyle given charging and infrastructure issues, and adding financial risk to the equation will likely give pause to even the most enthusiastic EV intenders. TL;DR: I wouldn’t go so far as to say this is detrimental for the new EV market, but we’re probably going to see some interesting shifts in EV purchase decisions moving forward. That might look like even more consumers opting to lease EVs or purchasing used to avoid getting trapped in the accelerated EV depreciation curve. More information can be found here: https://edmu.in/4eUpXMb