Car owners in California often take pride in their vehicles, but some may be struggling to keep up with their monthly payments. While owning a car is often necessary for employment, some people could see a large chunk of their paycheck going straight toward their auto loan. Although it is possible to eventually pay off a car in several years and live payment-free, getting to that point can be difficult. In such cases, Chapter 7 bankruptcy might be a better option.
Auto loans are nothing new, but they are certainly growing in size. Over the last 10 years, debt for auto loans has ballooned by over 75 percent. American consumers owe a collective $1.2 trillion in auto loans. So what is behind the significant boom in vehicle debt? The increasing popularity of vehicles like crossovers and SUVs -- which are more expensive -- could be partially to blame.
In 2018, the average car buyer paid about $35,444 when purchasing a new vehicle. The terms of these loans were also longer than in the past, coming out to about 69 months. These borrowers ultimately end up paying approximately $551 every month for their vehicles. With the average 2018 household income hovering around just shy of $62,000, this accounts for 11 percent of most people's yearly income.
Some auto loan borrowers are hesitant to move forward with Chapter 7 bankruptcy out of fear that they will lose their vehicles. While it is possible that California consumers might have to get rid of extra vehicles, most can still keep their main mode of transportation, particularly if it is for traveling to and from work or for dropping children off at school. These details can be confusing, though, so seeking guidance from an experienced counsel is generally recommended for those who are considering this step.