Car loans are becoming a financial burden for American consumers.

• According to a report from Edmunds.com, an increasing amount of Americans are in debt due to their car loans, with the value of their vehicles not covering the amount they owe.
• Another indication of pressure on American consumers is the growing number of consumers being underwater with upside-down car loans.

According to a report from Edmunds.com, an increasing number of Americans have auto loans that exceed the value of their vehicles.

During the third quarter, the average amount owed on upside-down loans reached an all-time high of $6,458, compared to $6,255 in the previous quarter and $5,808 a year prior.

Another indication of pressure on American consumers is the growing number of consumers being underwater with upside-down car loans.

Last month, the Federal Reserve reported that auto loan delinquency rates rose significantly above pre-pandemic levels, despite having fallen to historical lows during the global health crisis.

According to Jessica Caldwell, Edmunds' head of insights, while owing a little more than the value of one's car isn't the end of the world, a significant number of individuals owing $10,000 or $15,000 more than their cars are worth is alarming.

To counter upside-down car loans, consumers should hold onto their vehicles for longer periods and ensure regular maintenance is done to avoid additional drops in value and costs, according to Edmunds.

"Ivan Drury, Edmunds' director of insights, advised consumers to consider their ownership habits and not solely focus on monthly payments when prices and interest rates are high. A seven-year auto loan can lead to negative equity if the consumer is not willing to keep the vehicle for that duration."

The current state of upside-down loans is mainly due to consumers buying new cars in 2021 and 2022 due to a shortage of inventory caused by the Covid-19 pandemic and parts shortages. As a result, many paid full price or more, but their vehicles depreciated faster than anticipated as the auto industry and inventories normalized.