This is basically a score for how easy it is to get a car loan. Higher numbers mean more people are getting approved and banks are more willing to lend.
DealerTrack is a company that tracks and reports data used in car sales and car financing. In this episode, they’re the source of the lending data the hosts are quoting.
Interest rate is the extra cost you pay for borrowing the money to buy the car. Higher interest rates make the loan more expensive overall, even if you get approved.
Subprime share is the portion of loans going to people with lower credit scores. If it’s going down, it usually means fewer higher-risk borrowers are being approved.
Yield spreads are basically how much extra money lenders make on loans compared to a baseline rate. It’s a profitability measure, not a borrower-friendly metric.
“72 months” means the loan lasts about six years. A longer loan can make the monthly payment smaller, but it also means you’re stuck paying for longer and can end up owing more than the car is worth.
An auto loan is money you borrow to buy a car, then pay back each month. This episode uses loan statistics to explain why car debt may get worse later.
10.68% is the interest rate on the car loans. Interest is the extra cost of borrowing money, so a higher rate usually makes the loan more expensive overall.
Term
cost to ensure
This is talking about insurance—what you pay to have the car covered. The point is that insurance costs have gone up, making the overall monthly burden bigger.
“Debtors prison” is a metaphor for feeling trapped by debt. The host’s point is that car loans can become hard to get out of when costs rise and the car’s value falls.
Cox Automotive is a company that collects and analyzes car-industry data. In this episode, the host uses their numbers to talk about how car loans are doing.
Negative equity means your car is worth less than what you still owe on the loan. If you try to sell or trade it in, you still have to pay the difference.
Your down payment percentage is how much you pay at the start when buying the car. If it’s lower, you usually borrow more money, which can make the loan riskier.
This is a measure of how many higher-risk borrowers are missing payments by two months or more. A higher number usually means more financial trouble in the loan market.
Repossession is when the lender takes the car back because the loan is not being paid. More repossessions usually means more people are struggling to make payments.
A repossessed car is one the bank takes back because the owner stopped paying. Since the owner was already struggling with payments, the car may also have been neglected, so it can be in worse shape when sold used.
A monthly payment analysis is figuring out what you’d pay each month for the loan. The point here is to see if that payment is realistic, not just whether you can get approved.
Loan terms are how long you have to pay back the car loan. A longer term can make the monthly payment smaller, but you usually pay more overall and stay in the loan longer.
The Dodge Ram is a large pickup truck made for carrying things and towing when needed. A Ram 2500 Big Horn is a higher-trim version of that truck, often used as a rental because it’s roomy and capable. People talk about it because it can be a practical choice for trips where you might need extra space or power.
The Ram 2500 is a large, heavy-duty truck, and Big Horn is one of its trim levels. The host uses it as an example of what a rental can cost and how fuel expenses matter.
The Subaru Outback is a popular Subaru that’s made for everyday driving and bad weather, usually with all-wheel drive. Here, they’re using its price to show how your monthly payment and total interest change depending on how long your loan is.
Average transaction price means the typical real-world price people pay for a car after deals. It’s used here so the loan example matches what buyers are seeing in the market.
A payment calculator estimates what your monthly car payment will be. You plug in things like the price, down payment, interest rate, and how many months you’ll finance it.
Taxes and fees are the extra costs on top of the car’s price, like sales tax and other charges. Including them matters because it changes how much you finance and therefore your monthly payment.
Money down is the cash you pay upfront when buying the car. More money down usually means you borrow less, so your monthly payment and total interest can go down.
The Subaru Outback Wilderness is a more rugged version of the Outback. The hosts mention it to show that even a popular Subaru can get very expensive, which can make car loans feel harder to manage.
Term
sticker-shocked
“Sticker shock” means you’re surprised by how expensive the car is when you see the price. The point is that the monthly payment can hide the real total cost.
Loan term length is how long you have to pay off the car loan. A longer loan can make the monthly payment smaller, but you often pay more money overall because of interest.
Riskier approvals are when lenders approve loans for people who may be more likely to have trouble paying them back. The concern is that this can lead to deals that cost more over time.
The finance office is where the dealership handles the paperwork and the loan details. The hosts are saying to be careful because they may focus on the monthly payment instead of the total cost.
The finance manager is the person at the dealership who helps set up your loan and deal paperwork. The hosts are warning that their pitch may make the monthly payment seem easier than the real total cost.
The Honda Pilot Elite is a nicer, higher-end version of the Honda Pilot SUV. They mention it to compare prices and show how some family vehicles can be surprisingly expensive to finance.
The Toyota Sienna is a minivan people buy for family use. Here, the point is that even a minivan can cost a lot right now, which makes the monthly loan payment feel huge.
The 4Runner is a midsize SUV designed to handle tougher roads and light off-road driving. It’s popular with people who want a vehicle that can still be used daily but is also more rugged than a typical city SUV. It may be mentioned in a podcast when comparing options and costs.
“Carloan Apocalypse” is a dramatic way of saying car loans are getting harder and more expensive. The hosts argue that more lenders are taking on risk and buyers are getting stuck with higher loan costs.
They’re calculating a longer loan: 72 monthly payments. Even if the payment looks smaller, you often end up paying more money overall because you’re paying interest for longer.
Term
dealer is actually charging a $1,700 markup
A markup is extra money the dealer adds on top of the sticker price. If you finance that higher price, you borrow more and pay more interest.
MSRP (Manufacturer’s Suggested Retail Price) is the sticker price the automaker recommends for a vehicle before discounts. In the segment, MSRP is used as the baseline to compare against what the dealer is charging.
The loan amount is the total price you’re borrowing to pay for the car. If that number goes up, your payments and total cost usually go up too.
Term
car loan payments in excess of $1,000 a month
They’re talking about people whose monthly car payment is more than $1,000. The point is that a lot of borrowers are carrying very large monthly costs.
LIVE
It's noon here in Venter City, New Jersey, and New York, New York, a town so nice they
named it twice. And this is Corrange Live for Monday, July 13th. I think I got the date right
with your host, me, Ray, hanging out in my living room in Venda, and Zach hanging out in the office
in New York. Yes, they have multiple offices, ladies and gentlemen. Zach, how are you doing
today? I'm doing pretty good. I know sometimes when I'm in this office, the sound can be not
the greatest, so I'm going to do my best to talk down into the mic. Happy Monday, Dad. Excited
to be here with you for another episode of Car Edge Live. A friendly reminder, folks,
today's show is brought to you by caredge.com. For those of you that are unfamiliar, back at
caredge.com, my dad and I, with our incredible team, provide all sorts of car buying services.
For example, we have a car search. We have our buying service. We have Ask Car Edge, our research
centered dealer reviews. And you can even start everything with a free consultation with real
human beings on our team. We've got an incredible customer success team, Justice Andy, Tina,
Mitch, and Tony are waiting to hear from you. So tune in, learn more, back at caredge.com.
The big story this morning, the car loan apocalypse is here, and it keeps getting worse. The headline
in Cox Automotive reads, credit availability index hits 10 year high as lenders consumers
take on more risk. We're going to break down all of this data in just a second here.
But Dad, it is easier today than ever before to get approved for an auto loan, and that is a scary,
scary reality. We are seeing the highest levels of risk being taken on by both consumers and
lenders that we've seen since 2015. And this is at a time where auto loan defaults are already
at record setting highs. What's going on, Dad? Well, in order to keep this house of
cards of an economy going, consumers and banks have conspired together to make it easier for us
to get ourselves into a debt slavery. You don't like that term. I'm sorry. But that's what it is.
You know, the banks have extended loan terms. They have approved over 73% of those people who
apply for loans, which allows more and more Americans to become just enslaved to debt.
There's no way around it. And we as consumers, not me in particular, but many consumers,
have embraced that. And obviously, the banks are embracing it because that's the only way we
can keep this thing going, the merry-go-round going. So if we do, let's turn to the data and
let's look here, Dad. We have the highest level of auto credit availability on the index as reported
by DealerTrack in its entire history of more than a decade here. So you can see we're at some of the
highest levels of this particular index. And then in general, just auto credit availability.
Yeah, there you are actually all the way back to 2015. Excuse me. So you can see it right there.
We're back to 2015 levels of auto credit availability, meaning easier for consumers to get
approved, easier for banks to get those approvals as well. Which actually, the good news story here
is if you're thinking about buying a car sometime soon, you can more than likely get financing.
Like you said, the approval rate is almost 74%, which is up significantly from where it's been
historically. So if you got denied for an auto loan six to 12 months ago,
you'll actually probably get approved today. So you know what? That's the good news story here.
But here's the bad news portion of that. Back in 2015, interest rates were next to nothing.
An average interest rate might have been 3%, 2.5%, 3%, maybe 4%. The average interest rate
on loans right now was 10.68% if I remember correctly. So yeah, you can get approved and
be spending four times the amount in the interest charges. So yeah, the good news, bad news is,
hey, we'll give you a loan. The bad news is you're going to pay us a poop ton of interest for that
loan we're going to give you. It's a win for the banks. The banks are going to make them more
money now than they were back in 2015. Let's go through some of the other key data points here.
Approval rates you mentioned that I touched on in a second ago were up to 74%. This is 170 basis
points up month over month. 170 basis points is 1.7% up month over month. That is the most
significant jump we've seen ever in this index. Subprime share, this is a little bit of good
news generally speaking, went down 10 basis points month over month. So fewer people with
subprime loans are actually getting approved in this current environment. Yield spreads,
how much money they're making on these, we won't touch on that. The loan term length, dad,
where at 31.1% of all auto loans are 72 months or longer. So actually, you know what? If I may,
and I came up with a title for today's show, I actually think I got it wrong. The car loan
apocalypse isn't here. The car loan apocalypse is building up even bigger right now. That's what
this data suggests to us. Maybe there already is a little bit of an auto loan apocalypse because
we've seen default rates and loan and repossessions and things like that increase so much. But the
car loan apocalypse is growing even larger is what this data starts to suggest.
Yeah, the apocalypse is not now. The real apocalypse is in the future. Okay. And realistically,
not the too distant a future. You can't keep signing up nearly a third of all loans
for longer than 72 months at an average rate of 10.68%. People will sign on the dotted line.
And then 234 months from now realize, oops, I think I might have made a mistake. I might
bit off a bit more than I can chew because what people don't take into consideration when they
agree to that monthly payment on their car loan is there is more than just the car loan
portion of the expense of owning a car. The cost to maintain a car today is higher than it's ever
been. The parts to repair cars today are higher than they've ever been. The cost to fuel cars today
is higher than it's been in recent years. The cost to ensure that car has gone up 30 or 40% in the
last three or four years. And those are all costs that you have to consider when you're buying a car,
not just the monthly car payment. And this is where people put themselves in debtors prison.
I mean, it's like, sign me up for the loan, lock the jail cell behind me and throw away the key.
I don't know when people are getting out of these. I guess they're going to hope that somebody
commutes their sentence. I don't know. That as you were sharing that, I was pulling up a couple
examples. We have all this cost of ownership data back on the car. It's like that can help you make
a more informed decision. I want to share two more data points from this latest data we have
from Cox Automotive to inform the conversation. Negative equity share. This is good news.
The share of loans with negative equity declined by 30 basis points from 57%. The third consecutive
monthly decline following March's record high of 59.2%. So that's actually a good thing. That being
said, it's still up 220 basis points here over a year. And we know the data that we get from Edmunds
suggests that when it comes to negative equity, we have many folks that are 5, 10, 15, $20,000 upside
down on their auto loans. If I remember correctly, those who have negative equity,
the average negative equity today was well in excess of $7,000, if I remember correctly.
That is the proverbial poop ton of negative equity. $7,183 is the latest data we have
from Edmunds and it will be even higher when the next report comes out from them. And then the other
piece of news here is the down payment percentage. It actually declined. So we have less money being
put down on these vehicles. Now, not all lenders are the same. You've got the channel pipe here,
breakdown, which is super interesting as well. And so you can see certain lenders are getting a
little bit more aggressive than others. For example, captives are up 1.8%, up 14.9% year-over-year
independence are up 2.2%. So it becomes easier to get certain types of auto loans in today's
environment as well. Again, another sign that maybe there's a little bit of a loan apocalypse
brewing. Now, there's a gentleman over on LinkedIn. We have no affiliation with Bill. Bill Pluge,
he puts out, excuse me, some of the best information when it comes to what's going on in
auto loan delinquency, finance, things like that. June 2026 posted a 5.67% subprime 60-day
or greater delinquency rate, the second highest June on record from 1994 to 2026.
Below, I'm going to show you a heat map covering the last 390 months showing subprime auto loan
delinquencies. Green is good, red is bad. You ready to see this? Yeah, I'm pretty sure it's
bright red. Yeah, so you can see what's going on. I mean, there really is a big issue right now in
the auto industry, which is, yeah, we're approving more and more auto loans, riskier terms for both
the borrower and the bank, at a time when there's already a ton of delinquency and issues in the
market. And we've seen the number of repossessions increased dramatically. So we know that that's
one part of used car availability that seems to be growing is the repossessed used cars,
which indicates that more and more people are having greater difficulty in figuring out how to
make their car payments and live as well. So at a certain point, many, many people
choose not to make the car payment any longer. It's not sustainable for them. And
those are some of the largest percentage of vehicles that are making it back into the used
car market. And well, repossessed vehicles tend to be some of the worst quality vehicles that
make it back into the used car market. Because if you couldn't afford to make the payment,
you couldn't afford to maintain the vehicle. So in a second here, I want to do a little bit
of a monthly payment analysis. Because again, for those of you that maybe got denied for an
auto loan six months ago, 12 months ago, you can probably get approved right now. But let's look
at what you're getting approved for and if it actually makes sense to take on that risk.
Before we do some kind contributions early in the show. From Squeegee Kits, we appreciate this.
I've got your motors to celebrate America's 250th birthday. We are now offering 250 month
loan terms. Stop it soon. As we say, once we got you, we got you.
Once we get you, we got you. Thank you. Yes. Thank you for the market input,
Pops and Zach. That's awesome. I hope we never seek 250 month car loans. But you know what?
We see 120 months and that's enough. Yeah, 10 years is kind of crazy for a car loan.
Yeah, we also had this from Matthew Dad. Thank you, Matthew. We appreciate Pops.
I'm playing my swim race. Also had one of those Ram 2500 big horn trucks as my rental. $156 for
two days, $100 less than a compact. Guess gas is a thing. Yeah, I guess people don't want to be
spending a bunch of money on their rental car gas right now. Yeah. Let's face it, if you're
right in the car and you have to bring it back filled up with gas and if you don't,
the premium that the rental car company will charge you for having filled it up
would be astronomical. Yeah, it really will. All right, let's do a little bit of a live
experiment. So again, if you're just joining us now, we have the highest levels of auto credit
availability that we've seen in the past decade. I'll pull that back up on the screen, meaning
consumers and lenders are taking on more risk than we've seen in the past decade when it comes to
car purchasing. So let's do a bit of an analysis here. So let's come to the car search. I'm not
saying we're in the market for this Subaru Forester. Does that sound good? I can't remember
the last time I was in the market for a Forester, but I could be. I'm also going to pull open this
Outback because, wow, I didn't realize Outback's got to $50,000. So actually, we're going to start
with the Outback because this price point is actually closer to the average transaction price
of a new car, which is close to $50,000 right now. So this is a $51,497 vehicle. What I want to do,
dad, I'm going to come all the way down here. Where is it? To the
payment calculator. Because on the payment calculator, this is where I want to start to see,
okay, if I can get approved, that's great. But what does that actually mean in reality for me?
So what did you say the average interest rate was? Well, they said it was 10.68%.
Okay. 10.68%. Yes. Let's get rid of. Now we'll keep the estimated taxes and fees.
Am I putting any money down? Well, we know. People are putting some money down. Yeah.
So what do you think? Maybe on this $51,000. 10% sounds almost reasonable.
Okay. So we'll keep $5,000 down. I don't have a trade, so that's good for me.
And we've got the interest rate there. Yeah.
We're not doing 60 months. We're doing 72, right?
Well, do 60 months first. I'm going to take some notes. So at 60 months,
at 60 months, the payment is $1,083. Okay. At 72 months, the payment drops to almost
reasonable $947. Yes. Yeah. We're on a Subaru outback here, folks. $851.
$84,851. Now, bear with me for a second, because you like to do live experiments,
and I'm good with math, but I'm not that good with math. So we're going to take
60 times $1083. That equals, on that vehicle, you're paying back at 60 months, $64,980.
If you decide to go to the 72-month route times $947, you're paying back $68,184.
And if you decide because that $851 payment just is a little bit more reasonable for you
to spend every month, 84 times 851 equals $71,484, which means that you are paying
$7,500 more in interest by going from 60 months to 84 months. So yes, that payment,
which is $222 cheaper, seems like, yeah, I can afford it, but you're paying back
$7,500 extra in interest. And that's the part that keeps that jail cell door closed for you.
So that was a great example. And we're going to do one more, Dad, because that was the average
vehicle. It's crazy to say it, but that's Subaru we were just looking at. I'll pull it back up on
the screen. This is average in today's market. If you're going out to buy a new car, you will be
sticker-shocked beyond belief that a Subaru Outback Wilderness costs $51,497. And then you are
ultimately looking at what we talked about a moment ago here, payments ranging from anywhere of $1,083
on the loan term length that is most fiscally responsible, 60 months relative to your 72-month
note at $950, or your 84-month note at $851, you will get approved for these most people right now.
That's the shocking thing, is you will get approved for these. Even if you don't think to
yourself you can afford it, more and more people are finding themselves approved for lenders doing
riskier options. It doesn't mean you actually should take it. This is insane when you become more
affordable because you're just paying off more interest over a longer time period. That's a
slippery, slippery slope. And just remember, when you're sitting in the finance office with the
finance manager at the dealership, and the finance manager is showing you the different
payments based on different terms, and you're trying to decide whether or not you think you can
afford it. Don't fall for it when the finance manager says, you don't think the bank would
approve you for this type of loan and this type of payment if they didn't think you could actually
make it. Do you? No, I guess not. I guess I really can afford it. No, you really probably can afford
it, especially when you factor in what your insurance rates are going to go up to when you
have to make that payment as well. So don't fall for that when that is one of the lines you will
hear from the finance manager. You don't think the bank would really approve you for a payment
like that if they didn't think you could make it, do you? Yeah, I guess you're right. Yeah,
because that's exactly what we're seeing. We're seeing banks take on riskier approvals right now
than they have in the past decade, which, yes. Yeah, all right. Now, let's come here. We've got
from a big fan, Y90. Thank you for this. Thank you. I test drove an Outback XT Touring and a Honda
Pilot Elite. One was reasonable. $50,000. One was not. I'm going to guess the Honda Pilot was
reasonable and the Outback XT Touring was not. It's just a guess. It's still difficult for me
to acknowledge that either of those can be $50,000 vehicles, but that's the world we've been
right now. Let's do another example, Dad, because that was a Subaru and that was about $50,000.
I want to actually look at one of the most popular vehicles out there right now.
Let's turn our attention to a Toyota Sienna. That's where I want to go. Okay. Let's give
me a second. Actually, we're a forerunner at $64,000. We'll stick with the Sienna. Give me a
normal. Okay. Toyota Sienna, I want one that's a little bit more expensive than what we were just
looking at. Perfect. We're going to be in the market right now for this Intransit 2020 Toyota
Sienna Platinum. That's $63,198. Let's run the same exact thing. Ready?
Just the fact that it's a $63,000 minivan is like one of the most ridiculous phrases I have
since you're important. Absolutely they are, but $63,000 minivan? I can't even begin to imagine
what the payments are going to be on this bad boy. All right. That's where we're headed,
because again, for those of you that are tuning in late, the Carloan Apocalypse, we actually
made a mistake with today's title. Yes, we have access to credit at the highest levels we've seen
in the past decade, 10 years. Consumers and lenders taking on more risk, but what's actually
happening right now is the credit apocalypse, the Carloan Apocalypse is becoming an even bigger.
You're going to hate to hear me say it bubble right now. That's what's happening, because
someone out there is going to buy this Toyota Sienna Platinum. On average, they are getting hit
with a 10.68% interest rate. Let's look in that. Again, we'll do 10% as your down payment. Yes.
We're looking at here data. If you finance that for 60 months, $1,371. Okay. Let me know when
you're ready for 70. I'm ready. 72 is only $1,198. Okay. Can we sneak below the elusive
$1,000 a month payment? I don't think so. $1,077 for 84 months for this Toyota Sienna.
Once again, I'm not that good with math, so we're going to go to the calculator.
60 times $1,371 equals $82,262. Oh my God, $82,260. That was for the 60-month note low.
Yeah, I'm afraid so. 72 times $1,198, just a mere $2,256. My guess is that $84 times $1,077.
We're going to crack that $90,000 barrier, ladies and gentlemen. 84 times $1,077 equals $90,468.
Okay. That explains everything that is wrong with America at the moment. I mean,
you're talking about a $63,000 vehicle that ultimately you're paying nearly an extra $30,000
for because of interest and everything else so that it becomes a $90,000 vehicle.
We actually, forgive me, Dad, we messed something up too. Oh, what was that?
It's a $63,198 vehicle. Yeah. That's the MSRP. The dealer is actually charging a $1,700 markup.
Well, it doesn't really matter. No, but the reason that I bring it up is because this
changes the principle of the loan amount. Oh, yeah, no, absolutely. But at this point,
I mean, what the hell difference does it make? You know, $83,000, $87,000, and $91,000 is what
it is pure insanity. Okay. That people sign up for these type of things and they do every
friggin' day. Okay. It is unrealistic that banks are willing to subject consumers to this by going,
playing along, and say, sure, everybody should have to pay back $90,000, some $1,000 on the car
that they're buying. I mean, literally, this is putting people in prison and throwing away the
key. Maybe, just maybe, we'll bring you a meal or two every day. But you ain't getting out. You
are not getting out of this prison anytime soon. I mean, and we know the percentage of people that
have car loan payments in excess of $1,000 a month is, I believe it's like 21% of all car loans.
Have a car payment in excess of $1,000 a month. And I know that there are YouTube channels out
there where they go around and they say to people, what's your car payment? And you know,
the people are real excited. Well, mine's only $1,497 a month. Oh, mine's $2,275. I mean,
what the hell is wrong with these people? How is it that you justify that? And most of the people
they're asking are people that are in the car business, for goodness sake, that should know better.
And they're the biggest fools to fall for it. I mean, they are literally convinced both of you
know, the bank wouldn't agree to this if they didn't think I could do it. It is, nobody is using
their head here. And I mean, if you need a Toyota C-NVM, do you really need the $63,000 one? Or do
you think perhaps maybe you could get by with that $45,000? This is another one of those
perfect examples of buy what you need, not what you want. It is just nonsense. I feel terrible
that I ran about this all the time, but we are doing this to ourselves. We allow ourselves to do
why? How much better are you going to feel about yourself because your car payment
is $1,077 a month for the next 84 months? How does that make you feel any better about yourself?
I mean, you should look in the mirror and think yourself, my God, I can't believe how stupid I
am. I'll be good now. Folks, the point of today's show is this, just because you can get approved for
an auto loan and you need to know that again, if you were denied six months ago, 12 months ago,
you probably can get approved right now because there has been a relaxation on approvals. It
doesn't necessarily mean you need to take advantage of that fact. The salesperson, the sales manager,
the finance manager might remind you, the bank wouldn't have approved this unless you think
they think you can afford it. You need to do your research and that research starts with
understanding, quite frankly, total cost of ownership, how much car you can afford. Please,
please, please use some of the resources we've created and use resources anywhere to help you
make an informed decision. Dad, we need to call the show there. I have to go run to an important
meeting here in New York, so wish me luck with that, but we're back tomorrow with more Car
Edge Live and we appreciate everyone tuning in. Well, good luck with the meeting and I want to
compliment you on getting dressed up because I got the memo that it was white t-shirt Monday as well.
So hopefully, whoever the meeting is with, they appreciate the nice clean, cleanly pressed
white t-shirt. Okay, I'm done. I love you. Have a great afternoon. meeting. I'll talk
to you later. Love you too, dad. See you tomorrow. See you guys.
About this episode
Rising auto-loan risk meets looser approvals as credit availability hits a 10-year high and approval rates climb toward the mid-70% range. Hosts connect the “apocalypse” to longer terms, higher average interest (around 10.68%), and growing borrower stress signaled by negative equity, subprime delinquency, and more repossessions. They run loan-payment math on vehicles like a $51,497 Outback and a $63,198 car with dealer markup, showing how monthly “affordable” payments can hide thousands in extra interest.
Today on CarEdge Live, Ray and Zach discuss the latest on auto loan financing. Tune in to learn more! Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
for information about our collection and use of personal data for
advertising.
