‘Blows my mind’: North Carolina woman has put over $50K toward payments for her Tahoe — and barely made a dent in the $84K loan. How to make sure you avoid this

Yet the North Carolina mom says she still owes at least $74,000 on the car loan.

“Honestly, that blows my mind,” she says to the camera. Her audience clearly feels the same way: “You need to learn about interest rate,” one commenter said.

Leaving aside the specifics of her situation — which seems to be particularly extreme — auto loans can be crippling to a household's budget, even if you’re not splurging on a top-of-the-line SUV.

Interest rates are climbing

Arnold doesn’t disclose the interest or annual percentage rate (APR) that’s attached to her Tahoe loan.

APR is a measure of the total yearly cost of a loan, including the interest rate and all additional fees. It’s determined according to a host of factors, such as the key interest rates set by the Federal Reserve, retailers’ own borrowing terms and, importantly, your credit score (a higher credit score will yield a lower APR, and vice versa).

In another video, Arnold says that her husband pays 14% APR on his 2020 GMC AT4 Sierra 1500. She adds that his monthly payment —$1,600 — is greater than her own.

According to Experian, the average borrowing rate for a new vehicle was 7.03% in Q3 2023, up from 5.26%; for a used vehicle, the average was 11.35%, up from 9.38% last year.

Arnold says she and her husband bought the AT4 in 2022 and yet they still owe $72,000 to $74,000 of the $78,000 purchase price.

Arnold’s family’s car situation seems especially dire. She doesn’t provide enough information to explain how only about 20% of her own monthly payment is apparently being applied to the principal.

What is true for every car buyer, however, is that, unlike your home, an automobile loses value the second you drive it off the lot. Car insurer Progressive estimates that cars lose 20% of their value within the first year, and continue to lose 15% every year until about the fourth or fifth year.

For this reason, auto loans often end up “underwater” — a situation in which the outstanding principal is greater than the value of the car or truck.

How to avoid high loan rates

Arnold has decided to get rid of her Tahoe, though she doesn’t say whether her husband plans to give away his truck.

“Do not pay so much for something that is so irrelevant,” she warns her followers.

Arnold decided to ditch the Tahoe and buy an Audi in cash so she won’t have any more car payments. The reason she can do this — despite being in major car debt — is because her TikTok career has taken off.

In one of her videos, Arnold shows that she made nearly $4,000 off of just two TikTik videos in March.