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An increasing proportion of new car buyers have a trade-in vehicle, so they end up with the unwanted part of their old loan, or negative equity, on their new purchase.
An estimated 30.5% of car buyers with a trade-in owe more than their car is worth, according to J.D. Power’s March Auto Forecast. It is also said that the loan is underwater or upside down.
The share of underwater buyers is up 4.2 percentage points from a year ago and is increasing from 2022 onwards. However, it is not as high as it was before the pandemic. In 2019, the annual share of negative-equity trade-ins for new car purchases was 33.6%, according to JD Power data.
“The recent trend is toward mean reversion,” said Tyson Jominy, senior vice president at J.D. Power.
The average outstanding value of these underwater trade-ins reached an all-time high of $7,214 in the fourth quarter of 2025, according to car site Edmunds. Additionally, 27% of these trade-ins had negative equity of $10,000 or more, also an all-time high.
“This level of negative equity is nothing new, but the real and alarming story is the amount of money behind the scenes,” said Joseph Yun, consumer insights analyst at Edmunds.
Average payment for negative capital rolled in is $916
When you trade in a car with negative equity, the remaining loan balance is usually rolled into the loan on the car you’re buying. This effectively carries over your old debt to your next vehicle purchase.
The average monthly payment for buyers who took out negative equity into a new loan reached $916 in the fourth quarter of 2025, Edmunds said. This is the highest amount on record and $144 more than the average monthly payment of $772 for a completely new car.
Negative equity trade-ins have declined during the pandemic. According to JD Power, the annual market share in 2022 was 16%. After that, it started to rise and hasn’t stopped.
“The data shows that the supply chain crisis that pushed up trade values was the lowest point in negative equity,” Jominy said. “That makes sense. With fewer new cars available to buy, fewer consumers are coming back to the market for deals, and as a result,[used car]values have increased beyond the sector’s intrinsic demand.”
Average new car price is $49,353
The average price of a new car in February was $49,353, according to the latest data from Kelley Blue Book. This is approximately 30.3% higher than in February 2020, when the average price was $37,876.
The average age group for negative equity trade-ins is 3 to 4 years old, Edmunds said. “So these are vehicles that were purchased between 2022 and 2023, which was a really unusual time in the market, where it was not uncommon to pay above list price,” Yun said.
As car prices rise, “buyers are financing a larger portion of the purchase price and extending the term of the loan to afford the payments,” said Stephen Cates, a certified financial planner and financial analyst at Bankrate.
“The longer the loan, the more likely the car is worth less than the payment,” Cates said.
According to Edmunds data, 40.7% of new car purchases with negative equity are currently financed with 84-month loans.
“Whether this negative equity increase will have future economic ramifications for the buyer, both in content and amount, remains to be seen,” Yun said.
According to a recent report from TransUnion, about 1.5% of auto loans are at least 60 days past due. This is equivalent to the 1.5% share in the fourth quarter of 2019.
