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Negative equity hits 38% of US trade-ins – JD Power

The percentage of US new-vehicle buyers who owe more on their trade-in than it's worth has risen from 25% in 2001 to 38% now, according to JD Power.

This trend is one of the consequences of manufacturers holding down buyers' monthly payments on new purchases the same by lengthening finance terms.

The average length of a new-vehicle loan is now 58 months-an increase of almost 10% from three years ago when loans averaged 53 months. According to Tom Libby, director of industry analysis at Power Information Network, "Right now automakers are legitimately trying to sustain demand and market share through aggressive manipulation of finance instruments, but the long-term ramifications of these efforts are questionable."

Earlier this month, Singer & Friedlander advised dealers in the UK used car market to avoid similar long-term loan tactics.

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