A Shocking Number Of Buyers Are Already Underwater On Their Trade-ins

  • A new study has revealed over 25% of new car buyers are underwater on their trade-ins.
  • 23.4% owed more than $10,000 on their trade-in, while 7.7% owed more than $15,000.
  • Buyers who rolled negative equity into a new loan had an average monthly payment of $915.

Despite predictions of doom and gloom, the economy keeps chugging along. However, warning signs continue to pop up and one of the latest is a growing number of people being underwater on their auto loans.

According to a study from Edmunds, 26.6% of trade-ins toward new vehicles had negative equity in the second quarter. That’s a four year high and the number is up from 23.9% a year ago.

More: Car Repossessions Return To Great Recession Levels As 1.7 Million Vehicles Taken Back

Buyers weren’t just slightly underwater as the average amount owed was $6,754. This was down $126 from the first quarter, but the number was up $499 from a year ago.

The numbers vary widely and 32.6% of underwater trade-ins had between $5,000 and $10,000 in negative equity. 23.4% owed more than $10,000, while 7.7% owed more than $15,000.

A Shocking Number Of Buyers Are Already Underwater On Their Trade-ins

The questionable decisions don’t end there as buyers who rolled negative equity into their new loan had an average monthly payment of $915. That’s a record for the group and is $159 more than the overall industry average of $756. Edmunds also noted these customers financed $12,145 more than typical new car buyers.

The company suggested financial illiteracy could be part of the problem and they’re urging shoppers to “review their loan payoff amount and compare it to their vehicle’s current trade-in value to understand if they’re underwater.” As the saying goes, knowing is half the battle.

 Edmunds’ Joseph Yoon said, “If you’re thinking about replacing your vehicle but still have an outstanding loan, it’s important to understand where you stand financially before making your next move. In many cases, holding onto your current car and staying current on payments and maintenance may be the wisest choice.” However, if you must have a new car, he suggested getting one that fits your needs and budget.

Year New Cars Purchased with Trade-in Trade-ins with Neg Equity Avg Negative Equity Avg Trade-in
Age
2025 45.7% 26.6% -$6,754 3.8
2024 44.8% 23.9% -$6,255 3.7
2023 46.2% 17.3% -$5,543 3.4
2022 46.8% 14.7% -$4,487 3.2
2021 50.8% 23.1% -$4,246 3.6
2020 45.6% 37.2% -$5,845 3.9
2019 44.6% 34.6% -$5,317 3.8
SWIPE

Edmunds


The Auto World

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