In two years, the 40-year-old electrician signed up for four auto loans, each time trading in the previous car and rolling the unpaid balance into the next loan.
Those borrowers owed about $5,000 on average after they traded in their cars, before taking on new loans.
Rising car prices have exacerbated an affordability gap that is increasingly getting filled with auto debt.
Easy lending standards are perpetuating the cycle, with lenders routinely making car loans with low or no down payments that can last seven years or longer.
Borrowers are responsible for paying their remaining debt even after they get rid of the vehicle tied to it.
When subsequently buying another car, they can roll this old debt into a new loan.
Underwater car loans are more prevalent among subprime borrowers, according to ratings firms. »
