Record share of Americans are trading in cars with negative equity, Edmunds reports

On the Dash: 

• 28.1% of new-vehicle trade-ins in Q3 2025 were underwater, a four-year high.
• The average negative equity loan reached a record $6,905, with nearly one in four trade-ins carrying more than $10,000 in debt.
• Rolling negative equity into new loans increases monthly payments, averaging $907, $140 higher than the typical new-vehicle buyer.

More Americans are finding themselves with negative equity on their car loans, as a growing number are rolling this negative equity into new vehicle purchases.

According to Q3 2025 data from car-shopping experts at Edmunds, 28.1% of new-vehicle trade-ins in Q3 had negative equity, marking a four-year high. This figure has increased to its highest level since Q1 2021, reaching 31.9% of trade-ins that were upside down, compared to 26.6% in Q2 and 24.2% in Q1 2025.

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The total amount owed by upside-down car owners is also increasing. In Q3 2025, the average negative equity for trade-ins reached $6,905, surpassing the previous high of $6,880 recorded in Q1 2025. Notably, nearly one in three upside-down owners, or 32.9%, owe between $5,000 and $10,000, marking another record high. Additionally, 24.7% of trade-ins with negative equity carry more than $10,000 in debt, and 8.3% exceed $15,000, both of which are new peaks for Edmunds’ data series.

Similarly, rolling negative equity into a new loan can have substantial financial consequences. For instance, Edmunds analysts found that buyers who financed a vehicle while carrying negative equity had an average monthly payment of $907 in Q3 2025, which is $140 higher than the overall industry average of $767. 

Analysts attribute the rise in negative equity to rapid vehicle trading and pandemic-era loans. While many vehicles purchased during the market surge of 2020–2021 had record-high prices, numerous owners are now trading them in before they have paid down enough principal.

In Q3 2025, Edmunds reports that consumers purchased 44.6% of new vehicles using a trade-in, which averaged 3.7 years old. The share of trade-ins with negative equity and the average amount owed have both increased steadily over the past several years, highlighting the growing challenge consumers face in navigating the current auto market.