• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

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.

Need cash fast? Turn to Credible for hassle-free personal loans!

With competitive rates and transparent terms, Credible makes borrowing simple and stress-free. Whether it's for a new car, home improvement, or debt consolidation, find the perfect loan for your needs.

Find the best rate for you

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.

Paying cash for a car is the best way to avoid any interest, but it’s not possible for most Americans.

Still, if you’re in Arnold’s position and don’t have a thriving TikTok career, there are still ways to get out from under your car payment, according to personal finance celebrity Dave Ramsey.

Ramsey would endorse Arnold’s TikTok side hustle. He recommends getting an extra job so that you can make more payments on your auto loans.

Ramsey would also like that Arnold plans to get rid of her Tahoe. He told a listener in a similar position that he ought to consolidate the auto loans on his multiple cars — and then sell some of them to pay off the remaining balance.

The personal finance radio show host also says that you can go straight to the lender and negotiate with them on your rate. This must be done in-person.

“Not on the phone and for God sakes not by email!” he says. “Go sit down and look ‘em in the eye."

Sponsored

This 2 Minute Move Could Knock $500/Year off Your Car Insurance in 2024

Saving money on car insurance with BestMoney is a simple way to reduce your expenses. You’ll often get the same, or even better, insurance for less than what you’re paying right now.

There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Sabina Wex is a writer and podcast producer in Toronto. Her work has appeared in Business Insider, Fast Company, CBC and more.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.