When Will Car Prices Fall and Will Consumers Be Upside Down on their Loans When that Happens?
Right now, everyone knows car prices are insane. The same car you could expect to get for $10,000 a year ago, you now will pay $12,000.
What will happen once the chip shortage is resolved and the prices of cars come back down? Will Americans who purchased a new vehicle become upside on their auto loan? How much negative equity will they be carrying? Meaning, how many people will owe more money than the car is worth? An example would be if your vehicle is worth $15,000, but you owe $18,000.
The current speculation is the chip shortage will be under control in late 2022 or early 2023. However, this figure is constantly being pushed back.
If you need to purchase a new or used vehicle this year, it might be good to ensure you have a gap insurance policy. However, gap insurance is only applicable if your car gets stolen or declared a total loss. It does not cover if you decide you want to trade in your car and discover you're upside down.