In today’s world, owning a car is more of a necessity than a luxury. Motor vehicles are not cheap, though, and few people in Pennsylvania have the ability to purchase them outright. Most people turn to auto loans instead. Unfortunately, the state of the auto loan industry is not great, and piles of debt can threaten a car owner’s ability to keep his or her vehicle. For these people, saving the car from repossession is often a priority.
Consumers purchase and trade in vehicles for any number of reasons. For example, a car might no longer be in good working condition or have an expensive upkeep cost. A person might also simply want a new car, which is another common reason for visiting a dealership. Unfortunately, no matter the reason behind a new purchase, it can cause problems if someone has not already paid off his or her loan for the vehicle being traded in.
The auto loans stack on top of one another and often result in negative equity. Some people might be more familiar with the term “being underwater.” What it means is that a person owes more for his or her vehicle than it is actually worth. From Jan. to Sept. 2019, 33% of consumers trading in cars took on negative equity when doing so. The average person still had about $5,000 on the last auto loan, which is an increase from an average $4,000 in 2014.
Auto loans do not disappear just because a person no longer owns a vehicle. This can make it very hard for someone who purchased a new vehicle and is now struggling to pay off his or her negative equity. It is not exactly uncommon for individuals in this situation to fall behind on payments, and they can even lose their vehicles. Although Pennsylvania consumers might not realize it, filing for bankruptcy can be an effective way of saving the car.