OPTIONAL EXTRA CREDIT HW Understanding Auto Loan Negative Equity

What does it mean to be "underwater" on an auto loan?

• The car is submerged in water.

• The loan amount owed is greater than the car's value.

• The car is fully paid off.

• The car is worth more than the loan amount.

According to the article, what percentage of people who financed their cars have negative equity?

• 10%

• 25%

• 33%

• 50%

Why do you think a car typically loses value as soon as it is driven off the lot? Choose 2.

• Cars gain value over time.

• Cars depreciate (lose value over time due to wear and tear).

• Cars become more desirable once used.

• Even an almost-brand new car cannot be resold for the same price as you paid the dealer.

What is the primary reason for the increase in the number of underwater auto loans?

• Increase in car manufacturing costs.

• Rapid decline in used car prices.

• Increase in fuel prices.

• Decrease in car insurance rates.

What was the percentage drop in used car prices since their peak in 2022, as mentioned in the article.

• 10%

• 15%

• 19%

• 25%

Evaluate the impact of being underwater on an auto loan if a driver totals their car.

• The insurance will cover the full loan amount.

• The driver still owes the loan balance.

• The driver will receive a new car.

• The loan will be automatically forgiven.

What are the potential financial consequences for drivers who are underwater on their car loans if they decide to trade in their vehicles?

• They will receive more money than the car's worth.

• They still have to pay the remaining loan balance, which may be put into a new loan, or prevent them from getting the new car.

• They will not face any financial consequences.

• They will automatically have their loan forgiven.

What was the recent average negative equity on auto loans (approximately), according to the article?

• $10,000

• $4800

• $20,000

• $6400

How does being underwater on an auto loan add to the financial burden of owning a car? Choose the BEST answer.

• Interest rates may go up for financing the next car purchase.

• Insurance and repairs costs may go up.

• Parking and tolls may go up.

• All of the above.

When a car is totaled, the insurance company get to decide if they pay to repair it, or just pay you a lump sum for the current market value of the car. When would an insurance company choose to pay the lump sum, and what happens with the loan balance in that case?

• Lump sum when it's more than cost of repairs; you still owe the loan balance.

• Lump sum when it's more than cost of repairs; you don't have to pay off the loan balance.

• Lump sum when it's less than cost of repairs; you still owe the loan balance.

• Lump sum when it's less than cost of repairs; you don't have to pay off the loan balance.