Cars can be lovely, but they can also be painfully expensive, especially when you bite off more than you can chew. A new report found that more than a quarter of all trade-ins from April through June were underwater. In an era of sky-high car payments, that’s terrible news for consumers, and it’s likely a knock-on effect of the disruptions we saw four years ago.
At the same time, Stellantis expects a ten-figure hit during the second half of this year thanks to tariffs, Maserati’s head of engineering wants a stick-shift halo car, and 2026 is reportedly the last model year for the beguiling Lexus LC 500.
Once again, Matt’s out on vacation, so I’m here to bring you The Morning Dump. It’s our round-up of bite-sized car news stories you should read, so grab a cappuccino or a proper meal depending on what time of day it is where you’re at, and dig in. Don’t worry, your boss probably isn’t looking.
That’s Some Serious Negative Equity
When the new car market got all topsy-turvy a few years ago, everyone asked when things would be back to normal. The short answer? Possibly kinda never, depending on how you define normal. While new vehicle supply has mostly returned to normal minus a whole bunch of actually affordable options, we’re getting reports of a negative equity extravaganza play out across America as a whole bunch of factors have absolutely hammered vehicle affordability and left loads of drivers underwater, owing more than their car is worth.
According to Edmunds’ story Underwater Car Loans on the Rise: More than 1 in 4 Trade-ins Had Negative Equity in Q2 2025, the average trade-in age has returned to pre-2020 norms of 3.8 years old, but the number of trade-ins with negative equity and the average amount underwater is troublingly high. We’re talking 26.6 percent of trade-ins in the second quarter having negative equity, “the highest share Edmunds has on record since Q1 2021.” Of these upside-down loans, the average amount owing stands at a “historically high” $6,754. Yikes. What happened around four years ago to put people this far underwater?
Oh, right, the chip shortage. Just to jog your memory, here’s the short notes on what happened. A black swan event occurred in 2020 that made automakers slash production. Since the vast majority of automakers use just-in-time production, orders for parts dried up at the same time a consumer electronics boom happened. When things started back up a few months later, silicon chip production for cars was bumped to the back of the queue, exacerbating a shortage of new cars. Short supply plus high demand equalled high prices, with many consumers paying above sticker price for normal cars and many automakers offering only the expensive models. Add in the end of the near-zero-interest rate era putting higher interest atop higher principal, along with trimflation focusing production on high-margin trims and general headline inflation also driving up the price of the average new vehicle, and you have the conditions for lots of people being underwater once new car supply eventually “normalized.” At the end of the day, the person getting screwed is the consumer, as Edmunds eloquently puts it:
“Consumers being underwater on their car loans isn’t a new trend, but the stakes are higher than ever in today’s financial landscape,” said Ivan Drury, Edmunds’ director of insights. “Affordability pressures, from elevated vehicle prices to higher interest rates, are compounding the negative effects of decisions like trading in too early or rolling debt into a new loan, even if those choices may have felt manageable in years past. And as buyers take on new loans with much higher interest rates than those from just a few years ago, even potential tax deductions can’t meaningfully offset the thousands more they’ll pay in interest. With a growing share of upside-down owners thousands of dollars in the red, many are at risk of getting stuck in a cycle of debt that only grows harder to break over time.”
While higher new car prices let consumers roll more negative equity into new loans while staying within lenders’ approved loan-to-value ratios, it’s often best to either stick out the payment term on your current ride until you’re no longer underwater, or if the car you’re underwater on is starting to break often, roll that negative equity into a cheap lease for a lower payment and a faster pay-off time. Gap insurance is also a good idea if you’re rolling negative equity into a new contract because if that new vehicle gets totalled, gap insurance should make you whole.
Stellantis Predicts A Terrible, No Good Tariff Hit
Dodge can’t dodge tariffs, and neither can Chrysler, Jeep, or Ram. While the impact so far of the White House’s new trade strategy on new cars has been fairly slim, all signs are pointing toward a serious ramp-up. As Automotive News reports, Stellantis expects a financial impact of $1.4 billion in the second half of this year due to tariffs alone.
Stellantis’ main exposure comes from 25 percent tariffs on vehicles built in Canada and Mexico and sold in the U.S., but it also exports some vehicles from Europe, including models from Alfa Romeo, Dodge, Maserati and commercial vans.
Last year, more than 40 percent of the 1.2 million vehicles Stellantis sold in the U.S. were imports, mostly from Mexico and Canada.
Well, sort-of. See, for a passenger car to be USMCA-compliant, 75 percent of its value must now consist of parts made in North America, a minimum of 70 percent-by-value of an automaker’s steel and aluminum must be purchased from North American producers, and 40 percent of a vehicle’s value must meet high-wage expenditure requirements. However, the non-USMCA-compliant content of parts in cars made in Canada and Mexico is tariffed at 25 percent, and that’s where the big impact is.
Partly due to these tariffs and partly due to Stellantis shooting itself in the foot under the previous leadership of Carlos Tavares, North America now hangs like an anchor around the neck of the global automotive giant, being the only region to see a proper decline in adjusted operating income. Europe is essentially flat and the MENA and South American markets are up, so it’s critical that Stellantis gets its North American house together.
Maserati Wants To Bring Back The Manual
Actually, here’s something that might help a little bit, even if it probably won’t be USMCA-compliant. While Maserati’s been seemingly swimming in circles over the past decade or so, the demand for cars in which you shift gear yourself is high enough right now that in certain cases, stick-shifts command a premium over automatics, especially at the top end of the market. Speaking with Autocar, Maserati head of engineering Davide Danesin expressed enthusiasm for the idea of offering a manual gearbox on a halo car.
He said: “A manual gearbox is an opportunity. I don’t see that in big series [production], but why not do a special version with a manual gearbox? No reason to say never. It could be the right choice for a limited edition of a car.”
He added that a manual gearbox would emphasise the ‘pure’, analogue ethos of a Maserati supercar. “By doing a purely mechanical car, it does make sense to have a mechanical gearbox with a shifter,” he said. “So why not? It fulfils perfectly the brand. It fulfils perfectly our approach and the mindset. So honestly, I think one day we’ll do it.”
The last stick-shift Maserati was the Coupé GT and Spyder GT of the early-to-mid 2000s, so even if a row-your-own option returns as part of a limited-run model, it would effectively be the first manual Maserati in two decades. Plus, reading between the lines, there’s something oddly tempting about a three-pedal super-GT car because nobody really makes anything like that anymore.
It’s Reportedly Your Last Chance To Buy A New V8 Lexus
It’s always a heartbreaker when you hear word of a car you love being set to end its production run, and doubly so when it’s one of the loveliest cars on sale today. While we sort-of knew the direction the wind was shifting with the JDM Lexus IS 500 Climax Edition, it’s not just V8 sports sedan production that might be ending soon. A new report from Automotive News states that “Brand officials have announced that the LC will end production in 2026.”
Man, that sucks, but I guess the LC 500 has been in production for eight years now. Still, it’s the sort of breathtaking car worthy of a Peter Schutz moment. You know, the CEO of Porsche who looked at a timeline of models on a chart hanging on the wall, noticed the 911 lineage stopped in 1981, grabbed a marker off lead engineer Helmut Bott’s desk, and extended the line for the 911 across the page, down the wall, and out the door. The LC 500 is one of the few modern cars I wish could be made essentially forever, because it really is essentially perfect. Stunning looks, a sumptuous interior, a downright musical soundtrack, ride quality up there with the greatest GTs but just enough agility to cut a rug or torch a pair of Michelins if needed.
Thankfully, there will be a 2026 LC 500, but I’d recommend getting your order in now if you want to spec one. I have a feeling Lexus’ V8 grand touring coupe of the 21st century will be looked back on as one of the all-time great cars of its era. Of course, there’s also a chance some wires got crossed in this report, given that it claims the LFR will be electric, but Automotive News is a credible source of information when it comes to soon-to-be-discontinued models, so consider this the five-minute bell for five-liter Lexus exhiliration.
What I’m Listening To While Writing TMD
Every so often, an underground track comes along that’s hugely influential to the musical landscape over the next few years. “Iced out Castles” by Black Kray a.k.a. Sickboyrari from 2013 is one of those tracks. With DJ Smokey production floating an ethereal sample over thumping beats and vocal processing that set the benchmark for the Soundcloud generation, I feel like this is one of those joints that deserves more love because it was just ahead of its time.
The Big Question:
What currently available new car will you be saddest about when it gets discontinued?
Top graphic images: depositphotos.com; Toyota
I thought that automotive chip feature sizes were at 7nm and 5nm processes, but the IC industry for consumer devices was moving towards 2nm and beyond.
Do they even use the same fabs? I was under the impression that shutting down and restarting a chip fab was kind of a big deal. There is a huge difference between running a nearly obsolete factory with a lot of sunk costs and low margins that has a steady but modest profit, and starting one up, repairing idle equipment, tuning all the processes, hiring people that have the institutional knowledge that hasn’t been written down because stuff changes, etc.
If I ran a fab like that and had other customers, the temptation to just scrap the whole plant rather would be huge.
The auto manufacturers were negligent idiots if they hung their suppliers out like that, and even more stupid if they had single sourced chips.
Great job on TMD, spectacular as always Thomas. Wish you did it everyday.
I’ll applaud Maserati for building an unobtainium manual gearbox… Then I’ll continue not buying their obtainable slush boxes.