Auto Loan Debt Just Hit a New Record High

Here's an example of how this can look. A customer recently tried to trade in a Ford F-150 Lightning, one of those electric trucks that did so well in the sales, right? That was worth $47,000 while still owing $87,000 on it. That is, I just can't even imagine that. I'm sure that the dealership people, once they saw all the numbers, probably looked at this person like, you're kidding, right? Like, you can't afford to buy another car. You're stuck with this one. And this is no wonder why we just saw auto loan defaults rise to an annualized 3.8% as of March, which is the highest since when? Since early 2010, after we had the massive fallout from the great financial crisis. And get this, borrowers who roll their negative equity into a new car loan are more than twice as likely to lose that car to repossession within the first two years. And what else have we seen happen over this past couple of years is the repo epidemic absolutely explode with over 5 million vehicles being repoed recently. So naturally, this has led to a situation where auto loan debt has hit a new record high, like basically every other type of debt that Americans hold nowadays. But auto loan debt reached 1.68 trillion by the end of 2025, which is a 37% increase since 2018. And just like everything else that has gone up in price, the cost of a car has just gone up too fast compared to people's incomes, guys. Like in 2018, you could buy a brand new car between $35,000 and $37,000. And there are still some brand new cars you can buy at that price point, but they are becoming few and far between, right? Now, you're spending 50 grand for that same comparable vehicle, and that's $12,000 to $14,000 more in less than a decade. That's just too much. People's incomes have not gone up at that rate. There's virtually no brand new car that you can buy for under $20,000. This is why they don't want the BYD brand to make it to America, because if it did, then a lot of those vehicles would be at that price point, and they are afraid that this would absolutely crush American auto sales because we just wouldn't be able to compete. And they're probably right. And you know what's the worst thing about all of this? The main reason this is actually happening is because automakers are now focusing more than ever on serving high-income buyers who are immune to price shocks and all of the volatility of the economy. So once again, everything is being built for the rich. You look around at this neighborhood I'm in here in Keystone Point. I mean, look at these houses, guys. Look at these vehicles. Brand new Beamer, brand new house. Who affords that? The rich, right? You don't have average everyday people buying this. Same thing with the cars now happening. Literally every single segment of the economy is now being catered more and more towards the rich, which kind of makes sense because they're the ones who continuously can afford all of this nonsense regardless of what's happening. But it's leaving everybody else left behind is the main issue. There's almost no budget options left for anything anymore, whether it's vehicles, travel experiences, groceries, a place to live, you name it. And if you do find a budget option, it is suboptimal to say the least. You are making some major trade-offs in one way or another now when it comes to food. You're making trade-offs with the quality, buying very low quality, poorly made processed food. And if you're buying a cheap place to live or renting a cheap place to live, there's a good chance it's in a highly undesirable area, maybe due to crime or isolation or something else. You buy a cheap car, that thing's probably riddled with all kinds of issues and has 200,000 miles on it. You just can't win. Proof is in the pudding because look, in 2017, automakers built 36 models of vehicles that were priced at $25,000 or less. That was basically 10 years ago. And today it's only four, four. Pretty soon it's going to be zero. More than 43% of new cars are bought by households with incomes of $150,000 or more. And that doesn't mean that those people are doing well either, guys, because like we just previously discussed, 90% of people who are trading in a vehicle to buy one of those new cars is upside down on their loan, meaning that they owe more on that vehicle than it's worth and they're rolling that debt into the new car. So even if you have the high income, doesn't mean everything's going great for you. There's a high probability you're just spending beyond your means like everybody else, just at a higher level. Even people who make a very low income, people who are earning 35 grand a year, have an average car payment now of about $738 a month. I mean, these people are spending basically a third of their income on just the car payment. The $1,000 car payment was an absolute jaw dropper a few years ago when this became a thing. Now it's becoming just commonplace. You had about 20% of all financed new vehicle purchases in the first quarter of this year have $1,000 a month or more car payment, and that's up 17% from just one year ago. Imagine if you saw anything else go up 17%. Well, I guess you don't really have to imagine because basically everything that we buy and pay for is going up 17% in one year. So you don't even have to imagine, but the car payment and the amount of people financing $1,000 a month or more, that's going up at the same clip. And remember guys, that extra money has to come from somewhere. It's typically coming from groceries. It's coming from rent. It's coming from savings. It's coming from the emergency fund, coming from retirement accounts. It's coming from somewhere. Interest rates definitely aren't helping when it comes to financing cars, which is why I always recommend you don't have a car payment, if at all possible. New vehicle purchases in the first quarter of this year are averaging 6.9% interest rates. People who have under a 580 credit score will pay an 18% interest rate at those buy here, pay here places. So you're looking at a situation where somebody could be paying $14,000 in interest on a $30,000 car over a six year loan term. But according to the guy from Capital One, this is all okay. Nothing to worry about, nothing to see here, because as long as their share prices go up and their profits go up and they can continue to afford these yachts and mansions, then it's all good. As long as you have your car payment, just remember that guys, when you go to sign up for that car payment, who you're really supporting. And it is still 100% possible to buy cheap vehicles out there. My buddy from Car Questions Answered, Brandon, he has a car dealership in North Carolina and he only sells cars for cash over there for less than five grand. So you can't sit there and tell me that those options are not available anymore, because they are. It's just that people don't want to drive that. It's embarrassing, right? They don't want to have this old beater of a car because they want to look cool. They want to look like they have status and that costs money. And if it's costing you money that you don't have, well, whose fault is that? Nobody but your own. And for anybody who's stuck with me this long, today I'm walking down Xora Road. I think that's how you say it. I don't know. In Keystone Point. And I think I've officially walked every street in Keystone Point now. It took me all of this season being back here in Miami to do it, but it was cool to finally walk this entire neighborhood over here. In the past, I'd only walked a few streets here and there. But I really hope that anybody who stuck with me this long really got some value out of this video and you share it with somebody who needs to hear this. And if you did enjoy it, please make sure, double check that you are subscribed to my channel. A lot of times people think they're subscribed and then they realize that they're not. So make sure that you are. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.