Few weeks back, TikToker Blaisey Arnold put up a video talking about her Chevy Tahoe. In her (https://www.tiktok.com/@theblaiseyarnold/video/7345840612819815726?lang=en), she mentioned that she decided to rid of her dream car, Tahoe after three years. She took an $84,000 loan to pay for it, ending up making $50,000 in payments over three years. However, due to a high-interest rate on her loan, only $10,000 went towards the principal amount.
Her video quickly went viral, with several viewers questioning the loan’s terms. Arnold even jokingly considered resorting to drastic measures like [defaulting on her loan](https://www.tiktok.com/@theblaiseyarnold/video/7347109466174754094?lang=en) to cope with the untenable situation.
While it can be easy to criticize Arnold’s financial decisions, it’s essential to consider the broader forces at play that make car ownership expensive and sometimes, an unnecessary financial burden. This isn’t just Arnold’s problem, as several other women have also [come forward](https://www.tiktok.com/@_.jackie_.13/video/7345623885875907883?_r=1&_t=8lMn8QoMi3H) on [TikTok](https://www.tiktok.com/@sidneymariecarter/video/7344008873029815594?_r=1&_t=8lMnGQk8NGE) sharing high monthly car payment details.
Contents
The Cost of Car Ownership and Possibility of Opting out
The necessity of owning a car has made it ubiquitous. According to the 2021 Census, nearly [92 percent](https://data.census.gov/table/ACSDP5Y2021.DP04?hidePreview=true) of American households owned at least one vehicle. The benefits of owning a car are significant, and people often go to great lengths to own one.
However, the costs around car ownership have skyrocketed in the past few years. Factors like supply chain disruption in the pandemic, manufacturers [focusing more](https://www.politico.eu/article/automaker-earn-make-fewer-car/) on luxury vehicles, and high interest rates have made matters worse.
New car prices have become unaffordable for more than [80 percent](https://jalopnik.com/more-than-80-percent-of-americans-can-t-afford-new-cars-1850906956) of Americans. The market for used cars isn’t any better, with prices up [34 percent](https://finance.yahoo.com/news/car-market-fundamentally-broken-130000935.html) since early 2020.
High Risk of Exploitation for Car Buyers, especially the Low-income ones
While owning a car has become symbolic of prosperity and freedom, current car prices in the US make buyers more vulnerable to exploitation, especially those from low-income backgrounds.
A 2023 book cites[—Cars and Jails: Freedom Dreams, Debt and Carcerality](https://www.orbooks.com/catalog/cars-and-jails/)—highlights how individuals with poor credit histories often end up with expensive loans with high-interest rates.
Frequently Asked Questions
Why are car loans so expensive now?
Supply chain disruptions during the pandemic, manufacturers prioritizing expensive luxury vehicles and high-interest rates have contributed to car loans becoming exceptionally expensive. Especially new car prices have significantly increased, thus becoming unaffordable for a majority of the population.
How does a high-interest rate affect a car loan?
When someone takes out a car loan, they agree to pay the lender back in installments over a certain period. If the loan has a high-interest rate, a greater portion of the monthly payment goes towards interest rather than paying down the loan’s principal. This means they will end up paying much more than the car’s original cost over the loan’s lifespan.
What can someone do if they cannot afford their car payments?
If someone cannot afford their car payments, they might consider a few options. They could try to refinance their loan onto better terms, trade in the vehicle for a less expensive one, or, in dire situations, consider surrendering the car. It’s always best to seek advice from a financial advisor or counselor to explore the most suitable options.
While conducting interviews, we noticed many individuals were driving high-end vehicles. They were offered financing not for standard Hondas but rather for top-tier Mercedes, which left us wondering. The explanation lay in the fact that the lenders and dealers were confident about swiftly repossessing the vehicle if need be.
It’s important to note this vulnerability doesn’t only impact ex-prisoners. According to a [2021 Consumer Reports investigation](https://www.consumerreports.org/money/car-financing/how-loophole-ridden-auto-lending-laws-harm-consumers-a3113489289/), the absence of a federal interest rate limit and the complex labyrinth of state laws, exposes consumers to unscrupulous lenders.
The report tells the story of a disabled man who received a Jaguar loan with an incredible 75 percent APR. He admitted to not understanding the financial terms, his only interest was in getting the car. Another [article](https://www.consumerreports.org/money/car-financing/the-big-business-of-bad-car-loans-a2181686536/) revealed that lenders often provide loans to individuals with poor credit history, charging higher rates with the intent of repossessing the cars once the borrower defaults.
However, some glimmers of hope have emerged. Several states have begun addressing hidden fees and predatory loans issue. In late 2023, the Federal Trade Commission [introduced a new rule](https://www.ftc.gov/news-events/news/press-releases/2023/12/ftc-announces-cars-rule-fight-scams-vehicle-shopping) designed to curb deceptive auto lending and sales methods, which will take effect at the end of July 2024.
Despite these efforts, auto debt climbed to a [record $1.61 trillion](https://www.newyorkfed.org/microeconomics/hhdc) in 2023, with the burden particularly crushing on those who are least able to pay. Thus, while understanding how auto loans operate is essential, it is equally critical to act against lenders who take advantage of individuals who need cars for survival and may not realize they’re being taken advantage of.
### Frequently Asked Questions
#### Why do lenders offer financing for high-end cars to individuals with poor credit history?
Lenders and dealers are confident about their ability to repossess the car if the borrower defaults on their loan. This enables them to offer loans for high-end cars even to those with poor credit history, in many cases charging higher rates.
#### What measures are being taken to curb deceptive auto lending and sales methods?
The Federal Trade Commission announced a new rule at the end of 2023 designed to curb deceptive auto lending and sales practices. The rule is set to take effect at the end of July 2024.
#### How much debt did the auto industry record in 2023?
In 2023, auto debt climbed to a record-high $1.61 trillion. This debt disproportionately impacts those who are least able to pay it off.
