Markus Andrews

May 17 is your last chance to claim your 2020 tax refund by filing your federal return.
As of May 6, there was still an estimated $1 billion in unclaimed refunds from tax year 2020, and the median payment was $932, according to IRS data.
Your pending refund could include 2020 pandemic relief, such as the recovery rebate credit if you didn’t receive a stimulus check.

JGI/Tom Grill

May 17 is your last chance to file 2020 returns and claim your refund, which could include missed pandemic relief, experts say.
As of May 6, there was still an estimated $1 billion in unclaimed refunds from tax year 2020, and the median payment was $932, according to the IRS.

There is no late filing penalty if you’re owed a refund. But roughly 940,000 taxpayers could surrender their 2020 refund payment if they don’t file by May 17, the agency said in May.
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The deadline is “terribly important” because there’s a three-year refund expiration after each tax deadline, said certified public accountant John Karls, partner at accounting firm Armanino.
The 2020 tax deadline was postponed to May 17, 2021, amid the pandemic — and the three-year deadline to file 2020 returns and collect refunds is now upon us.
“If you let if you let it slip, there’s nothing anybody can do,” said Bill Smith, national director of tax technical services at financial services firm CBIZ MHM. “You won’t get your refund when the statute of limitations has run out.”

You won’t get your refund when the statute of limitations has run out.

Bill Smith
national director of tax technical services at CBIZ MHM

Plus, “2020 was the year of with additional tax breaks or credits” for certain filers, Karls noted.  
That could include the recovery rebate credit, a nonrefundable tax break for eligible filers who didn’t receive economic impact payments. These payments, also known as “stimulus checks,” are linked to coronavirus relief. 
If you’re eligible for relief and don’t file your return by May 17, you’re “truly leaving dollars on the table,” Karls added.

Create a ‘roadmap’ for past filings

If you still haven’t filed 2020 returns and are feeling overwhelmed by where to begin, the IRS has tools to make the process easier, according to Karls.
You can log into your free IRS online account to access your wage and income transcripts, which include certain tax forms, such as Forms W-2, 1098, 1099 and 5498.
“For many taxpayers, this is by far the quickest and easiest option” for collecting missing information, according to the IRS.
“That’s going to give a roadmap” and let you know if you need to contact a past employer, Karls said.
But it may take time to collect the missing forms, so you should start the process as soon as possible, he said.
You can also collect missing tax forms online via your bank or other financial institutions. More

When the U.S. Department of Education released the new interest rates on federal student loans, there was some unpleasant news for parents.
So called Direct PLUS loans for parents would come with a 9.08% interest rate for the 2024-2025 academic year. That’s the highest rate in more than 30 years, said higher education expert Mark Kantrowitz.

Wagnerokasaki | E+ | Getty Images

When the U.S. Department of Education released the new interest rates on federal student loans Tuesday, there was some unpleasant news for parents.
So called Direct PLUS loans for parents will come with a 9.08% interest rate for the 2024-2025 academic year. That is the highest rate for parents in more than 30 years, said higher education expert Mark Kantrowitz. The current rate is 8.05%.

The last time rates for parent loans were higher, according to Kantrowitz’s data, was in 1991-92, when the rate was 9.34%. At the time, student loan rates were variable, and parent borrowers would have taken out an SLS loan, which he said is similar to the PLUS loan.
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As college costs soar, more parents are joining their children in borrowing to help pay the bills, experts say.
In the 2019-2020 academic year, the average parent PLUS borrower had a balance of more than $40,000 when their child graduated, compared with around $26,000 in 2010-2011, after adjusting for inflation, Kantrowitz found.
“Parents can easily borrow more than they can afford to repay,” he said.

How much student debt parents can afford

As a general rule, Kantrowitz said, parents shouldn’t borrow more in student loans than their annual income. That total is for all their children combined.
If they stick to that ceiling, he said, “they should be able to repay it in 10 years or less.”
But each family is different.

If you’re planning on retiring within the next decade, you probably should borrow less, Kantrowitz said. That’s because you don’t want a monthly student loan bill still coming in when you’re on a fixed income.
Meanwhile, if you’re still paying off your own student debt, you’ll likely want to think twice about digging the hole deeper, experts said.

Tips for parents taking on student debt

When a parent is considering taking on student loans after their child has maxed out their limit, it is often a sign of overborrowing, Kantrowitz said.
“The alternatives include enrolling at a less expensive college, student employment and applying for scholarships,” said Kantrowitz, adding that an in-state public college can cost a quarter of the cost of a private college while providing “just as good a quality of education.”

Parents who do take out PLUS loans should try not to defer their loan payments while their child is in school, said Betsy Mayotte, president of The Institute of Student Loan Advisors.
“Even though that’s an option, doing so will increase the total interest that accrues on the loan,” Mayotte said. More

Almost half (45%) of Americans plan to take a summer trip requiring a flight or hotel stay, and they expect to spend an average $3,594, according to NerdWallet’s 2024 summer travel report. 
While most travelers intend to finance a portion their trips on debt, some don’t plan to pay it off immediately.
Here’s what to consider about summer travel in 2024 and how to shed costs.

Klaus Vedfelt | Digitalvision | Getty Images

If you plan to spend money on travel as the days get longer, sunnier and warmer, be careful: It could leave you with high-interest debt you will still be paying off through the fall and winter.
Almost half (45%) of Americans plan to take a summer trip requiring a flight or hotel stay, and they expect to spend an average $3,594, according to NerdWallet’s 2024 summer travel report. 

The majority of travelers, 83%, will pay for part of their vacation costs with a credit card. But 20% won’t pay off the balance in full within the first billing statement, NerdWallet found. The report polled 2,092 U.S. adults from Jan. 30 to Feb. 1, 2024.
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“Travel expenditure is not slowing down,” said Hayley Berg, lead economist at Hopper.
The summer wedding season may contribute to travel debt. About 31% of recent wedding guests took on debt, according to a new study by LendingTree. Of those who paid with credit, the cost of travel (32%) and accommodations (27%) racked up the highest bills, LendingTree found.

‘More bang for their buck’

Three quarters of Hopper users said they plan to spend the same or even more on their travels this summer, the 2024 Travel Outlook by Hopper found.

“But they are trying to get more bang for their buck,” she said, by getting more trips out of the bigger or same-size budget.
About 86.6% of Hopper users expect to travel this summer, but 72.5% have not booked their trips yet, according to the outlook.
“It never surprises me how many people wait until the last minute to book their vacation,” Berg said.
Fortunately for travelers, airfares are down 5.8% from a year ago, according to the consumer price index.

Domestic airfare for the months of June, July and August cost around $305 on average, down 6% from this time last year, according to Hopper. Prices are expected to peak at $315 per ticket at the end of May and early June, per Hopper data.
“That is a vast improvement over the prices increases that we have been seeing every year,” Berg said.

But other costs associated with air travel have gone up. For instance, many major airlines like United Airlines, American Airlines and JetBlue Airways increased their checked baggage fees this year.
“Most airlines raised their fees by five dollars,” said Sally French, travel rewards expert at NerdWallet.”That typically means something like 35 dollars now becomes 40 dollars … That’s an additional 40 dollars there for a round trip.”
Some cardholders may believe that carrying a balance while they pay off a vacation or other big-ticket purchase is good because it helps to show they’re using the card, said French.
That’s a common misconception. In 2022, about 46% of Americans believed that leaving a balance on their credit card is better for their score than paying it off entirely, according to NerdWallet data.
“There are many myths about credit cards,” French said. “Leaving a balance in your credit card is not necessarily good for your credit score.”
The reality is, carrying a balance can increase your credit utilization ratio, which has the potential to ding your score. Plus you’re adding to the expense of that purchase, with average credit card interest rates topping 20%.
Cardholders already owe $1.12 trillion in credit card debt, with an average balance of $6,218 per consumer, according to a new report by the Federal Reserve Bank of New York.

‘If you have not booked, book now’

Smart planning and budgeting can help you cut travel costs and make it easier to avoid carrying a balance. Here are three strategies to try:
1. Book summer travel plans soon: The sooner you book your travel plans, the lower the upfront cost will tend to be. Prices for domestic flights in the U.S. tend to spike the weekend before 4th of July week, Memorial Day weekend and Labor Day weekend, per Hopper data.
“If you have not booked, book now,” Berg said.
“The sweet spot” for international trips is three to five months in advance; if you plan on taking a trip in August, now is the time. For domestic flights, about two to three months in advance is best for summertime trips. You might still have time to book late summer, early fall trips, she explained.

2. Be as flexible as you can: If you are able, avoid departing on Thursday or Friday nights; try booking flights on Tuesdays or Wednesdays. Flying in the middle of the week can save about $50 per ticket on domestic airfare, and “a whole lot more” on international, Berg said.
If you’re flexible on your trip dates, booking vacations for September and even early October can save you 30% off hotel and airfare prices. And “the weather is typically just as good, fewer crowds in many destinations,” Berg said. “Easy way to save money and also have a little bit less of a tourist experience.”
2. Save on food costs: When budgeting for a vacation, travelers focus on hotel and flight costs because they typically book and pay for those in advance, said French. Restaurant prices are often a surprise when travelers review their spending and “are shocked by how high it is,” she said.
Look for options to save on food costs by going to counter-service options over table service. Or go to a local farmers market or supermarket and cook something on your own for a meal or two.
“Dining out is a huge part of a lot of people’s trips, so you might not want to skip that entirely,” French said.
3. Leverage credit card rewards: Some credit cards offer benefits and rewards on dining and travel expenses such as checked bag fees. They might also extend those perks to other people you’re traveling with, French said.
But this isn’t a last-minute move: It takes time to apply and then receive your new card. “Many people get tripped up because you do have to apply for this credit card ahead of time,” she said. More

Deflation is the opposite of inflation. It’s when prices decline for goods and services.
That has largely occurred for physical goods such as home furniture, appliances, and new and used cars over the past year, according to the consumer price index.
Some categories of food and travel costs such as airfare have also deflated.

Oscar Wong | Moment | Getty Images

Inflation is higher than policymakers would like across the broad U.S. economy. Yet, there are many sectors seeing the opposite dynamic: deflation.
Deflation means prices are declining for consumers. Conversely, inflation measures how quickly costs are rising for goods and services.

Consumers have largely seen prices deflate for physical goods, such as cars, furniture and appliances, economists said. They’ve also declined for some groceries and other things, such as travel, according to the consumer price index.

Why home goods prices have decreased

Demand for physical goods soared in the early days of the Covid-19 pandemic as consumers were confined to their homes and couldn’t spend on things such as concerts, travel or dining out.
The health crisis also snarled global supply chains, meaning goods weren’t hitting the shelves as quickly as consumers wanted them.
Such supply-and-demand dynamics drove up prices.
Now, however, they’ve fallen back to earth. The initial pandemic-era craze of consumers fixing up their homes and upgrading their home offices has diminished, cooling prices. Supply chain issues have also largely unwound, economists said.

Prices on goods have been in “modest deflationary territory for a while now,” said Michael Pugliese, a senior economist at Wells Fargo Economics.
Physical goods prices have deflated in all but one month since May 2023, for example. Prices are down 1.3% in the past year, according to CPI data.
Perhaps the most prominent examples are items sold in retail stores, such as home furniture, said Stephen Brown, deputy chief North America economist at Capital Economics.
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Furniture and bedding prices fell 3.8% in the past year, and 0.5% just in the month from March to April, according to CPI data.
Meanwhile, prices for home appliances, such as laundry equipment, declined by 5.6% in the past year.
Additionally, they’ve decreased for goods such as dishes and flatware, down 6.5%; toys, down 7.4%; outdoor equipment and supplies, down 6.1%; and sporting goods, down 1.1%.

The U.S. dollar’s strength relative to other global currencies has also helped rein in prices for goods, economists said. This makes it less expensive for U.S. companies to import items from overseas, since the dollar can buy more.
The Nominal Broad U.S. Dollar Index is higher than at any pre-pandemic point dating to at least 2006, according to Federal Reserve data. The index gauges the dollar’s appreciation relative to currencies of the nation’s main trading partners such as the euro, the Canadian dollar and the Japanese yen.
Downward pressure on goods prices has waned a bit in recent months as supply-and-demand dynamics have normalized, economists said.

Car, travel and food prices have also deflated

Prices for new and used vehicles have also deflated over the past year, by 0.4% and 6.9%, respectively. They were among the first categories to surge when the economy reopened broadly early in 2021, amid a shortage of semiconductor chips essential for manufacturing.
Grocery prices have also declined over the past year, in categories such as ham, frozen fish, eggs, milk, cheese, citrus fruits, coffee and potatoes. Notably, consumers have seen apple prices fall 12.7% in the past year amid burgeoning supply.

Each food item has their own idiosyncratic supply-and-demand dynamics that influence prices, said Mark Zandi, chief economist at Moody’s Analytics.
Broadly, though, “American consumers are getting much better at shopping and buying things where they’re getting a price break,” he said.
“Grocery stores have to respond to the price sensitivity,” he added.
Meanwhile, inflation on the services side of the U.S. economy has proven “more buoyant” than that of goods, Zandi said.
Relatively strong wage growth has played a big role, since services jobs tend to be more labor intensive, economists said.

However, travel costs — which are part of the services side of the economy — have bucked that trend. Airfare, hotel and rental car prices have declined by 5.8%, 0.4% and 10.1%, respectively, since April 2023, for example.
Airlines have increased the volume of available seats for travelers by flying larger planes on domestic routes, which has helped push down prices, for example, according to Hayley Berg, lead economist at travel site Hopper.
There’s also been “quite a large correction” in the price of jet fuel, said Capital Economics’ Brown. Such fuel is a key input cost for airlines.

Elsewhere, some deflationary dynamics may happen only on paper.
For example, in the CPI data, the Bureau of Labor Statistics controls for quality improvements over time. Electronics such as televisions, cellphones and computers continually get better, meaning consumers generally get more for the same amount of money.
That shows up as a price decline in the CPI data.

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Many Americans are still earning higher interest after a series of rate hikes from the Federal Reserve.
Interest from savings accounts or certificates of deposits incurs regular or “ordinary income” taxes, depending on your federal income tax bracket.
But there are options to reduce taxable interest, according to financial advisors.

Riska | E+ | Getty Images

The first question someone should ask is how much cash do they still need and whether it makes sense to invest some of that money elsewhere, according to CFP Ashton Lawrence, director at Mariner Wealth Advisors in Greenville, South Carolina.
Typically, financial experts recommend keeping an emergency fund of three to six months to apply to living expenses. But the amount could be higher depending on your needs or short-term goals, experts say.
For those ready to explore tax-friendly investments for cash allocations, here are some options to consider.

‘One of the best options’ for cash

If you’re a higher earner, you may consider municipal bonds, muni bond funds or muni money market funds, experts say.
There are no federal taxes on interest accrued on these assets and you could even avoid state and local levies, depending on where you live. But muni bond interest can trigger higher Medicare Part B premiums, experts warn.
A muni bond exchange-traded fund is “one of the best options available” for tax-advantaged cash, said CFP Andrew Herzog, an associate wealth advisor at The Watchman Group in Plano, Texas.
Muni bond fund yields can be lower than their taxable counterparts. But you need to calculate the after-tax yield on fully taxable funds for an apples-to-apples comparison.

Save in ‘high-income tax states’

Another option for cash is Treasury bills, or T-bills, with terms ranging from one month to one year, according to Thomas Scanlon, a CFP at Raymond James in Manchester, Connecticut.
While you’ll still owe federal taxes on T-bill income, the assets are exempt from state and local taxes.
“This really matters in high-income tax states like California, New York and others,” Scanlon said. But there’s no benefit in places like Florida or Texas with no state income tax.

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As protections and relief options for federal student loan borrowers grow, refinancing your debt may be a riskier move than it once was, consumer advocates warn.
“We have seen, time and time again, private student loan borrowers left out of many of the programs they really need,” said Persis Yu, deputy executive director at the Student Borrower Protection Center.

D3sign | Moment | Getty Images

As the affordable options and relief measures for federal student loan borrowers pile up, consumer advocates advise caution before refinancing your debt.
“How’s this for a warning? DON’T!” Betsy Mayotte, president of The Institute of Student Loan Advisors, wrote in an email to CNBC.

Refinancing your federal student loans turns them into a private student loan and transfers the debt from the government to a private company. Borrowers usually refinance in search of a lower interest rate.
However, many people don’t realize what they’re getting into, said Persis Yu, deputy executive director at the Student Borrower Protection Center.
“We’ve seen aggressive marketing by a number of private lenders to try to lure folks away from the federal student loan space,” Yu said. “And we have seen, time and time again, private student loan borrowers left out of many of the programs they really need.”
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Mayotte has witnessed the same: “Borrowers who refinance their federal loans into private forever lose access to the safety nets and lower payment options unique to federal loans.”

David Green, CEO of Earnest, an online lender, said that refinancing can be “life-changing” for those who are excluded from the government’s relief options because of their earnings or other reasons.
“Consider taking advantage of [forgiveness] before looking at refinancing,” Green said.
“While we can’t predict the future of forgiveness options, if you make above the initial salary limit the federal government proposed, or otherwise don’t qualify for a loan forgiveness program, then refinancing might be a good option to explore,” he said.
“You may spend less time paying off your loan, or have a more reasonable monthly payment, which can save a significant amount in interest over the life of your loan,” Green added.

Refinancing is risky ahead of Plan B forgiveness

Consumer advocates have long pointed out that private lenders don’t provide the same range of relief options as does the U.S. Department of Education. (For example, federal student loan borrowers can pause their payments if they become unemployed, return to school or get cancer.)
But advocates have fresh warnings now as the Biden administration reforms the federal student loan system.
While President Joe Biden has been in office, the Education Department has cleared the federal education loans of nearly 4.6 million people, totaling almost $160 billion in aid. Most of that relief came through expanding access to relief programs.
Millions more federal student loan borrowers could receive debt forgiveness in the coming months if Biden’s revised relief package survives legal challenges this time.
Immediately after the Supreme Court blocked the president’s first aid package, his administration began working on a Plan B. More than 25 million borrowers still stand to benefit from the program, including those who’ve been in repayment for decades or seen their balance grow from interest.

Borrowers lose access to relief programs

Borrowers who refinance their loans lose their eligibility for the government’s debt cancellation, Mayotte said.
One potential loss is no longer qualifying for the Public Service Loan Forgiveness program, she said. PSLF allows certain not-for-profit and government employees to have their federal student loans cleared after 10 years of on-time payments.
“I’ve worked with too many borrowers who have done [refinancing] only to find out their loans would have been forgiven under PSLF,” Mayotte said.

Mayotte also recently heard from one borrower who said they’d refinanced based on advice from their financial advisor — and as a result, missed out on having their more than $400,000 balance forgiven when the Education Department excused 317,000 former Art Institute students of their debts earlier this month.
“[It] was heartbreaking,” Mayotte said.
The U.S. Department of Education, which reviewed evidence provided by the attorneys general of Iowa, Massachusetts and Pennsylvania, concluded that the for-profit Art Institute chain of schools and its parent company, the Education Management Corp., or EDMC, made “pervasive and substantial” misrepresentations to prospective students about post-graduation employment rates, salaries and career services.

Repayment options are a ‘huge, huge difference’

Income-driven repayment plans, meanwhile, allow federal student borrowers to pay just a share of their discretionary income toward their debt each month. The plans also lead to debt forgiveness after a certain period, usually somewhere between 10 and 25 years.
Most recently, the Biden administration introduced a repayment plan that lowers the percentage borrowers need to pay of their earnings to 5%, compared with 10% or more under existing programs. The new option, called The Saving on a Valuable Education, or SAVE plan, will leave some people with a monthly bill of $0.
“There is no right to an affordable repayment plan with private student loans, and that’s a huge, huge difference between the federal student loan space and the private loan space,” Yu said.

Much lower interest rate not a guarantee

The top reason people refinance their federal student loans is to pick up a lower interest rate. But that may not be so easy to do right now, said higher education expert Mark Kantrowitz.
“Interest rates are high,” Kantrowitz said, estimating that those who refinance pick up a rate between 5% and 11%. (The rates on federal student loans for the 2024-2025 academic year will range from roughly 6.5% to 9%.)

Refinancing likely only makes sense for borrowers with the best credit — a score above 800 — since they’re the only ones likely to gain a significantly lower interest rate, Kantrowitz added.
Still, any borrower considering the move should look closely at what protections and possible forgiveness opportunities they’re forfeiting, he said.

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Collectively, Americans owe $1.12 trillion on their credit cards, the Federal Reserve Bank of New York reported Tuesday.
The average credit card balance is now $6,218, a new report by TransUnion found.
As consumers lean on their credit cards, more borrowers are also falling behind on their payments, both reports show. 

Keeping up with credit card debt is getting more difficult.
Americans now owe $1.12 trillion on their credit cards, the Federal Reserve Bank of New York reported Tuesday.

The average balance per consumer stands at $6,218, up 8.5% year over year, according to a separate quarterly credit industry insights report from TransUnion.
“Consumers continue to use credit, and in particular credit cards, as they navigate the world we face right now,” said Charlie Wise, TransUnion’s senior vice president of global research and consulting. 

Higher prices and higher interest rates have put many households under pressure and prices are still rising, albeit at a slower pace than they had been.
The consumer price index — a key inflation barometer — has fallen gradually from a 9.1% pandemic-era peak in June 2022 to 3.4% in April.
Young adults, especially, have had to stretch financially to cover rising rents, ballooning student loan balances and larger auto loan payments, Wise said.

“Rent, when you have it, auto loans, utilities, these are all things consumers prioritize ahead of credit cards,” Wise added.
As a result, credit card delinquency rates are higher across the board, the New York Fed and TransUnion found. Over the last year, roughly 8.9% of credit card balances transitioned into delinquency, the New York Fed reported.
According to TransUnion’s research, “serious delinquencies,” or those 90 days or more past due, reached the highest level since 2010.
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Overall, an additional 19.3 million new credit accounts were opened in the fourth quarter of 2023, boosted in part by subprime borrowers looking for cards with higher limits, according to Wise. Subprime generally refers to those with a credit score of 600 or below, according to TransUnion. 
“Although access to credit and loans can provide a lifeline for families struggling to meet basic needs, relying too much on these financial coping strategies may lead to financial instability if families have a hard time keeping up with debt or do not recover from using savings not intended for routine expenses,” said Kassandra Martinchek, senior research associate at the Urban Institute. 

This is ‘your highest-cost debt by a wide margin’

Credit cards are one of the most expensive ways to borrow money. The average credit card charges a near-record 20.66%, according to Bankrate.
“If you have credit card debt, this is probably your highest-cost debt by a wide margin,” said Ted Rossman, Bankrate’s senior industry analyst. “Paying it down needs to be a household priority.”
With an average annual percentage rate of 20%, if you made minimum payments toward the average credit card balance, which currently stands at $6,218, according to the TransUnion report, it would take you 18 years to pay off the debt and cost you more than $9,200 in interest, Rossman calculated.
“Try to pay way more than the minimum — pay it all if you can,” Rossman said.
Otherwise, switch to an interest-free balance transfer credit card “to pause the interest clock for up to 21 months,” he advised, “or take on a side hustle, sell stuff you don’t need or cut your expenses in order to dedicate more money to your debt payoff efforts.”
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Incentives are coming back to the auto market, but interest rates remain high.
However, car shoppers can still reap the benefits. It will require more research and flexibility.
“Consumers can find good deals, but you have to go model by model,” said Brian Moody, executive editor at Kelley Blue Book.

Simonskafar | E+ | Getty Images

Incentives are coming back to the auto market, but high interest rates are weakening those deals for car shoppers.
“Pre-pandemic, people would see a 0% financing for 60 months and think, ‘no big deal,’ because it was available everywhere,” said Jessica Caldwell, an insights analyst at Edmunds, an auto research site.

In today’s market, consumers are more likely to see it as “free money,” she said, especially as auto loan rates stay high.
The average annual percentage rate for a new car loan was 7.1% in the first quarter of 2024, marking the fifth month in a row of rates more than 7%, according to Edmunds.
The APR for used car loans rose 11.7% in the same period, up one-tenth of a percentage point from the prior quarter.
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Despite high borrowing costs, car shoppers can still reap some benefits from reintroduced financing offers and other incentives like discounts and dealer cash. But shoppers must to do more research than in that earlier era to find those deals, experts say. 

“Consumers can find good deals, but you have to go model by model,” said Brian Moody, executive editor at Kelley Blue Book.

Be cautious about longer loan terms

Financing offers depend in part on the loan term. You might get a better interest rate with a short term, but a lower monthly payment with a long term.
While extending the life of the loan can help shrink monthly costs, you risk owing more than what the car is worth, which can create more financial problems later on, experts say.
“The negative equity situation is real,” Edmunds’ Caldwell said.
Shoppers must be realistic about how long they plan to keep the car, Caldwell explained.
If you’re someone who buys a new car every three to four years, you might end up in a situation when you trade in that your vehicle and is worth less than you owe, she said.
The share of new car purchases in that situation — known as a negative-equity trade-in — rose to 23.1% in the first quarter, according to Edmunds. That’s up from 18.3% from a year ago and 14.7% in the first quarter of 2022.
The average amount of negative equity jumped to an all-time high of $6,167 in the first quarter, researchers found.

When you roll that into your new car loan, it increases your payment.
The average monthly payment for new car shoppers who traded in underwater loans was $887 in the first quarter, according to Edmunds. The average APR was 8.1% for a term length of 75.8 months.
When you’re comparing financing options, instead of only focusing on lowering the monthly payment, be sure to figure out the total interest you will be paying, experts say.
“That’s where you have to be cognizant,” Caldwell said. “Longer loan terms will always look more attractive because they’re more affordable, but that’s really only part of the story.”
According to Moody: “The quicker you pay it off, the less interest you’re paying.”

What to do before you go to the auto dealer

1. Search for available incentives: Car shoppers will have to a do lot more shopping and research to find available incentives, Caldwell said.
“There are deals creeping out there,” she said. “There was a point two years ago where there just wasn’t any; no deals to be had.”
Seek out models that are not in high demand, as automakers and dealers “rarely incentivize popular” models, Moody said.
“There might be cash back or low financing on one type of Ford, but on [another] type, there’s nothing,” Moody said. “It makes it more challenging for consumers because you really have to go and do your research.” 
2. Know your credit score: While shoppers might come across 0% financing offers, those deals are often reserved for buyers with excellent credit. Find out what your latest score is to avoid getting stuck into deals you didn’t fully understand, Moody explained.

3. Get pre-qualified for different loans: Shop around for auto loans at different banks or credit unions before going to the dealer, experts say.
That lets you determine what kind of interest rate you’re able to get and compare offers, Moody said.
Don’t limit yourself to comparing the monthly payments. Consider the amount of interest you will be paying over the life of the loan, Caldwell said.
Having these options will also help you negotiate with dealers.
“Always give the dealer the opportunity to beat that deal in terms of interest rate and the loans terms, and oftentimes, they can,” Moody said. “If they can’t, you already have this loan.”

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