Oh So Dizzy

The number of new-vehicle buyers who owe more on their trade-in than it is worth the classic situation has gone up substantially within three years. That's according to retail transaction data from the Power Information Network (PIN), an affiliate of J.D. Power and Associates. While only 25% of trades were upside-down in 2001, today it's 38%, says PIN. It stems from intense competition in the U.S.

The number of new-vehicle buyers who owe more on their trade-in than it is worth — the classic “upside-down” situation — has gone up substantially within three years.

That's according to retail transaction data from the Power Information Network (PIN), an affiliate of J.D. Power and Associates.

While only 25% of trades were upside-down in 2001, today it's 38%, says PIN.

It stems from intense competition in the U.S. new-vehicle market. To maintain market share, manufacturers are keeping monthly payments of new and refreshed models the same by lengthening loan terms.

The average length of a new-vehicle loan is now 58 months. That's an increase of almost 10% from three years. Consumers who opt for the longer-length loans take longer to build equity in their vehicle.

“If this trend continues, eventually the factory will have to provide a lot of assistance, which is not good news for the auto makers,” says PIN analyst Tom Libby.

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