Part 5/11:
Most auto loans extended in 2020 and beyond were based on inflated vehicle valuations. As these prices have plummeted, borrowers now owe more on their cars than the cars are worth, creating a wave of negative equity. This situation is compounded by lenders offering to waive auto stipulations — allowing consumers to take out new loans for vehicles despite already being underwater on existing loans. This practice significantly elevates the risk of defaults and repossessions.
Elon Musk concurred with predictions that these trends could lead to a surge in repossessions, which would further depress car prices across the board. This scenario would impact not only used cars but also new vehicles, as dealers and consumers alike become wary of overpaying for vehicles in an uncertain economy.