Because here's what happens when you're underwater on a car loan. Let's say, Sarah's escape breaks down, or she needs something bigger, or she just wants to trade. She can't. Not without coming up with that extra $5,000 in cash. So, she's stuck, making payments on a depreciating asset, watching the gap between what she owes and what it's worth get wider every month. And Sarah's not alone. About 23% of trade-ins in 2024 had negative equity. Nearly one in four car owners owes more than their vehicle is worth. Jessica Caldwell, another industry analyst, sees the bigger picture. The American car market has become a tale of two cities. Wealthy buyers who can afford $60,000 trucks, and everyone else getting pushed into longer loans and older cars.

Higher prices meant longer loans. Longer loans meant people stayed in debt longer. People in debt longer meant they couldn't trade down or pay cash for their next car. So, they needed even longer loans for their next purchase. Meanwhile, something else was happening in the financing world. Subprime auto lending exploded. Companies started offering loans to people with credit scores that would never qualify for a mortgage. 7-year loans, 8-year loans. Some lenders pushed terms out to 10 years, a decade of car payments. The result? Today, about 6 million Americans are more than 90 days behind on their auto loans. 6 million people who can't make their car payments.