Charlotte, North Carolina – A North Carolina woman’s shocking revelation about her car loan has brought attention to the hidden costs of financing a vehicle. Blaisey Arnold, a mother of three, shared in a viral TikTok video that despite paying $50,000 in monthly payments over three years, she still owes $74,000 on her $84,000 loan for a Chevy Tahoe. The situation highlights the impact of interest rates on auto loans, which can significantly impact a household’s budget.
Interest rates are on the rise, with the average borrowing rate for new vehicles reaching 7.03% in the third quarter of 2023, up from 5.26% in the previous year. Arnold’s husband, in another video, revealed that he pays a 14% APR on his 2020 GMC AT4 Sierra 1500, with a monthly payment of $1,600. Despite purchasing the AT4 in 2022, they still owe $72,000 to $74,000 of the $78,000 purchase price.
Arnold’s decision to sell her Tahoe and buy an Audi in cash showcases the challenges many face with car loans. While paying cash for a car eliminates interest costs, it may not be feasible for most Americans. Personal finance experts like Dave Ramsey suggest additional ways to manage auto loan debt, such as getting an extra job to make more payments or negotiating with lenders to lower rates.
The depreciating value of vehicles exacerbates the issue, with cars losing 20% of their value in the first year and 15% annually thereafter. This depreciation often leaves individuals underwater on their auto loans, owing more than the vehicle’s worth. Arnold’s experience serves as a cautionary tale about the importance of understanding interest rates and loan terms before committing to a purchase.
While Arnold’s TikTok success allowed her to pay cash for a new car, not everyone has that option. Ramsey advises those in similar situations to consider consolidating loans, selling off excess vehicles, or negotiating with lenders. Taking proactive steps to address high loan rates can help individuals regain control of their finances and avoid the pitfalls of long-term debt associated with auto loans.