Negative equity on trade-ins affects nearly a third of car buyers
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For a growing share of new car buyers who have a vehicle they can trade in, an unwelcome portion of their old credit is hounding them for their new purchase: negative equity.
According to J.D. Power, an estimated 30.5% of trade-in car buyers owe more than the car is worth. automotive forecast For March. Also known as being underwater or upside down during the loan.
The share of underwater buyers increased by 4.2 percentage points compared to a year ago and has been increasing since 2022. But that’s not as high as it was before the pandemic: The annual share of zero-equity swaps was 33.6% in 2019, according to J.D. Power data.
“The recent trend has been toward mean reversion,” said Tyson Jominy, senior vice president at J.D. Power.
The average amount owed from these underwater swaps reached an all-time high of $7,214 in the fourth quarter of 2025, according to the auto site. Edmunds. Additionally, 27% of these trades carried negative equity of $10,000 or more; This is a record level.
“While these negative equity levels are nothing new, the real and disturbing story is the amount underwater,” said Edmunds consumer insight analyst Joseph Yoon.
Average payout for negative equity transferred is $916
When you trade in a car for negative equity, the remaining loan balance is usually transferred to the loan on the car you purchased. This effectively carries the old debt towards the next vehicle purchase.
The average monthly payment for buyers who rolled negative equity into a new loan reached $916 in the fourth quarter of 2025, according to Edmunds. That’s a record figure and $144 more than the average monthly payment of $772 for all new car purchases.
Negative equity swaps have decreased during the pandemic. According to JD Power, the annual share in 2022 was 16%. Then it started to rise and didn’t stop.
“The data shows that the supply chain crisis, which drives up business values, is a low point for negative equity,” Jominy said. “It makes sense. When there were fewer new vehicles available for purchase, there were fewer consumers returning to the market with trade-ins, which caused prices to rise.” [used car] values for the sector beyond organic demand.”
Average new car price is $49,353
The average price of a new car in February was $49,353. Latest data from Kelley Blue Book. This means that the average price is approximately 30.3% higher than in February 2020. $37,876.
On average, the age range for negative-equity trades is 3 to 4 years, according to Edmunds — “which means these are vehicles purchased between 2022 and 2023, which is a truly abnormal period in the market where it’s not uncommon to pay sticker price,” Edmunds said.
As vehicles become more expensive, “buyers are financing a larger portion of the purchase and extending loan terms to cover payments,” said certified financial planner Stephen Kates, a financial analyst at Bankrate.
“Longer loans mean a greater chance that the value of the car will drop below the amount owed,” Kates said.
According to Edmunds data, 40.7% of new car purchases with negative equity are now financed with 84-month loans.
“It remains to be seen whether this growth in negative equity will lead to future economic consequences for buyers, both in terms of sample and quantity,” Yoon said.
According to one study, approximately 1.5 percent of auto loans are at least 60 days past due. Latest report from TransUnion. This is on the same level as this fourth quarter of 2019while the share is also 1.5%.
