Worthless Auto Trade-Ins Signal Riskier Loans
- A third of vehicles traded in last year were upside-down
- Rising percentage reflects riskier lending as auto sales slow
Photographer: Stephen Morton/Bloomberg
This article is for subscribers only.
A growing share of the trade-ins that U.S. auto dealers and lenders accept for car-purchase financing are worthless on paper, a sign that banks and finance companies are making riskier loans to keep up revenue as vehicle sales slow.
Almost a third of cars traded in last year were worth less than the loans that had been financing them, according to car-shopping website Edmunds. That’s up from about a quarter a decade earlier, said Edmunds, which looked at cars traded in as part of financing packages for new auto purchases in the U.S.