(NewsNation) — New data shows that more than one in four new vehicle trade-ins are underwater, meaning owners owe more than their car is worth.
According to Edmunds, this is a four-year high. There were 26.6% of trade-ins toward new car purchases that had negative equity in Q2, up from 26.1% in Q1 this year and 23.9% in Q2 2024. In 2021, 31.9% of new-car trade-ins were upside down.
The average amount owed on upside-down loans in Q2 was $6,754, which was down from $6,880 in the first quarter of the year but still up from 2024’s $6,255.
“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,” Ivan Drury, Edmunds’ director of insights, said. “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.”
The average monthly payment for buyers who rolled negative equity into a new loan climbed to $915 in Q2, which is the highest on record for this group and $159 more than the overall industry average of $756. That group also financed $12,145 more than the typical new-vehicle buyer.
Experts recommend that car owners looking to buy a new car review their loan payoff amount and compare it to their vehicle’s current trade-in value to understand if they’re underwater.
