I’m sure you’ve seen it. Kinda hard to miss, actually, what with a headline almost custom-made for an exclamation mark.

Indeed, for those in the business of clickbaiting — who, me? — a heading that reads “30 per cent of vehicle trade-ins in Canada were in negative equity, averaging $7,051” is like manna from heaven.

It would be, without a word of exaggeration, the auto-journalistic equivalent of telling Rex Murphy that a certain high-level politician, known for his smarmy hauteur and grandiose virtue-signaling, might have fired an aboriginal female justice minister because she would not “direct” a mitigating of charges against a private company he just happens to be palsy-walsy with. The throat goes dry, the fingers get twitchy and the words almost write themselves.

Unlike the prime minister’s conflict of interest issues (which are largely the kind of thing only the political chattering-class worries about), however, this negative equity thing is the kind of fiscal problem that affects typical, everyday Canadians.

To wit: If market research company J.D. Power is correct and fully 44 per cent of Canadian consumers have a vehicle to trade in when they’re shopping for a new car — and if one-third of those vehicle trade-ins are $7,051 in the red — some simple math tells us that as many as 14 per cent of the Canadians who bought a new car in 2018 had what Canadian Black Book is calling “negative equity.”

In plainer English, what the numbers are saying — and this is where you should start being scared — is that almost 14 per cent of new-car buyers owe $7,051 more on their existing car loan than the vehicle they’re trading in is worth.

In other words, if you’re still not catching this, they’re giving their dealer their current car and yet still owe him — specifically his captive finance arm — another $7,051 before they start paying for their new car. If the new car they’re eyeing costs $30,000, then they’re on the hook for $37,051.

Considering how widespread this problem is — which speaks to the lack of financial literacy my friends at the Financial Post are always vexing about — perhaps a little more context is warranted here. The trade-in has historically been the automotive equivalent to the down payment we are all required to make on our homes.

Imagine for just a moment, then, the consternation of our finance minister — long exasperated by the record debt-to-income ratio being foisted on Canadian homeowners — if 14 per cent of the Canadians shopping new homes were so in debt from the sale of their first condo that they had to borrow $500,000 to finance the new $400,000 split-level two-bedroom they were moving up to. And, yes, that’s what the numbers are saying.

But how did we get here?

Well, although Canadian Black Book trots out some impressive statistics regarding the relative resale value of all the cars we trade in — noting, as an example, the difference between a best-in-class depreciation of only 16 per cent versus a worst of 59 per cent — the problem isn’t so much with the value of the cars we’re trading in, but that we’re financing them for too long. Simply put, the greatest enemy of fiscal responsibility — the trade-in, in this case — is the extended loans that are now a mainstay of automotive financing.

Forgive this rather simplistic explanation, but if you don’t know already, thanks to the wonders of loan amortization, much of your monthly payment goes to paying the bank its interest with comparatively little paying off the principal (i.e., reducing how much you owe). Thanks to the complexities of interest repayment rescheduling and automotive depreciation, pretty much every car will be worth less than what is owed — the classic definition of being “underwater” — for the first few years of a loan.

The problem is, with the now de rigueur eight-year loan, the break-even point — where your car is finally worth more than you owe — is somewhere around the six-year mark. Sell it before and you’ll owe more on the car than it’s worth. That, for those so far challenged by my math, is where those $7,051 of debt comes from.

Avoiding this debt is actually quite simple: Don’t buy a new car before you’ve finished paying off the old. Now, other than the fact this would require our indulged millennial progeny to live within their means — for it truly is the hipster generation that is buying cars they can’t afford — such fiscal responsibility could cause some serious consternation to our Canadian auto industry.

On something of a tear these last few years — despite sales dropping slightly last year, 2018’s two million units is still a giant uptick compared with the 1.6 million units sold just a decade ago — extended loans have become the car industry’s crack cocaine, the low monthly payments they allow having become addictive to consumer and dealer alike.

The situation has become so fraught that the Canadian auto industry would now seem to face a conundrum: Wean its consumers off these extended loans and risk a serious downturn in sales, or keep feeding them the cheap monthly payments they crave and just wait for the crash.

Indeed, consumers have become so preoccupied with monthly payments — as opposed to how much money they actually owe — they have willingly, if inadvertently, taken on more debt than they can handle. Meanwhile, just like the crack addict always looking for a higher high, the auto industry keeps on promoting these long-term loans because as soon as the kids stop buying cars they can’t afford — well, cold turkey is a bitch.

There is an easy solution, at least for consumers. The first step would be to realize there is a huge difference between being able to afford $535 a month and being $40,000 in debt. They could, of course, just stop buying cars on what my dear old mum used to call the “never-never.”

Or, if temptation proves too much, at least keep them until the loan is paid off. Unfortunately, that would require something called “fiscal responsibility,” an attribute seemingly in dreadfully short supply these days.