What that means when buying a new vehicle
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More drivers across the country, “underwater” or “upside down” in automobile loans. It costs them when it’s time to buy a new car.
Approximately 26.6% of the trade for new automobile purchases had negative equity in the second quarter of 2025. in accordance with To Edmunds, an automatic site. Edmunds Insights Director Ivan Drury said that this figure increased slightly than 26.1% in the first quarter of the year and the highest in the last four years.
According to the report, in the first quarter of 2021, when the last time was higher, 31.9% of new automobile trade was underwater.
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Such drives are not under water in insignificant amounts. Edmunds is $ 6,754 in the second quarter.
“Looking is a surprising figure, Drry Drury said.
Experts, drivers traded in a car upside down to pay this balance or to round their new loans should find cash, he says.
How the drivers are ‘underwater’
To be sure, it is not unusual to see underwater auto loans.
Since Autotrader and Kelley Blue Book Senior Personnel writer Brian Moody have a depreciation of cars, you can already be under water on your loan from the moment you leave the seller with a new vehicle.
However, other options, such as getting a longer credit time or making a smaller down payment, may make the problem worse.
Nevertheless, extending the conditions of a automobile loan, “the only thing consumers can do to reduce costs, Drur said Drury.
Authorized, 84 -month -old automobile loans “increasingly widespread” came to the point. According to EDMunds data given to CNBC, 84 -month car loans in the second quarter of 2025 consisted of 19.2% before 21.6% of new automobile loans.
According to the data, the 72 -month loan in the second quarter to compare fell from 38.6% in the second quarter.
Moody is not a problem to have negative equality when you still have it and when you drive, Mood said Moody. It becomes a problem when you need to sell or trade.
If your vehicle is total, negative essence may also be problematic. After an accident, your insurance company will usually pay the real cash value of the car. If this is less than you owe your loan, you are responsible for the remaining cost.
How to buy a new car when you are underwater
Experts, keep this debt to a new loan or hide your existing vehicle to avoid finding cash to meet it.
If you really need a new car, it is important to do preliminary research before entering a car dealer. Drury, if you have negative equity from a previous automatic credit, can help you save borrowing costs, rounding to a lower -interest vehicle loan.
First, understand what happened Moody Moody said. In general, if we talk, Your score is higherThe better the interest rate and credit conditions of the lenders.
“It is important to know your credit score and to know in advance to know what interest rate you are entitled to.” He said.
Drury, try to get in advance for different automobile loans in various banks or lenders. This helps you to get a better measurement about the terms that you can deserve and distinguish the best offers.
When you are ready to purchase, the car seller can either try to match the opportunities you have or offer better financing options.
If you are going to be under water on this new loan – let’s say, because you owe your previous vehicle or undertake a long credit period – you are a car seller or your insurance company, also known as GAP insurance, also a problem with guaranteed asset protection insurance.
If your vehicle is having an accident, “Capabilities covers the difference between the value of the vehicle and what it owes” in accordance with An Insurance Institute, an Industrial Group.
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