Nov 9, 2019

Car loans are dragging Americans underwater

Illustration: Sarah Grillo/Axios Visuals

More people buying new cars with trade-ins have negative equity than in previous years, the Wall Street Journal reports, and those borrowers already carry more car debt before taking on new, steeper loans.

Why it matters, per the WSJ: "Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value."

What's happening: Consumers and their lawyers tell the WSJ that new vehicle trade-ins are necessary for changing needs, car malfunctions or life circumstances, like growing families.

  • Negative equity, higher interest rates and monthly payments, and longer loan terms are trapping consumers in "a cycle in which each new trade-in leaves them deeper underwater," per the WSJ — and easy lending standards are fueling the cycle.
  • "Rising car prices have exacerbated an affordability gap that is increasingly getting filled with auto debt," the WSJ reports.

The big picture: In February, the number of Americans with auto loans 90 days past due shot to a new record high — 7 million — yet, auto lenders have been issuing more and more loans in recent years.

Go deeper: Car loans mean banks don't need high interest rates to rake in cash

Go deeper

The wreckage of summer

Illustration: Sarah Grillo/Axios

We usually think of Memorial Day as the start of the summer, with all of the fun and relaxation that goes with it — but this one is just going to remind us of all of the plans that have been ruined by the coronavirus.

Why it matters: If you thought it was stressful to be locked down during the spring, just wait until everyone realizes that all the traditional summer activities we've been looking forward to are largely off-limits this year.

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 8 a.m. ET: 5,428,605 — Total deaths: 345,375 — Total recoveries — 2,179,408Map.
  2. U.S.: Total confirmed cases as of 8 a.m. ET: 1,643,499 — Total deaths: 97,722 — Total recoveries: 366,736 — Total tested: 14,163,915Map.
  3. World: White House announces travel restrictions on Brazil Over 100 cases in Germany tied to single day of church services.
  4. Public health: Officials are urging Americans to wear masks over Memorial Day.
  5. Economy: White House economic adviser Kevin Hassett says it's possible the unemployment rate could still be in double digits by November's election.
  6. Federal government: Trump attacks a Columbia University study that suggests earlier lockdown could have saved 36,000 American lives.
  7. What should I do? Hydroxychloroquine questions answeredTraveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Updated 5 hours ago - Politics & Policy

U.S. coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios. This graphic includes "probable deaths" that New York City began reporting on April 14.

The CDC is warning of potentially "aggressive rodent behavior" amid a rise in reports of rat activity in several areas, as the animals search further for food while Americans stay home more during the coronavirus pandemic.

By the numbers: More than 97,700 people have died from COVID-19 and over 1.6 million have tested positive in the U.S. Over 366,700 Americans have recovered and more than 14.1 million tests have been conducted.