As consumers contend with higher auto payments, new data from car website Edmunds suggests they may be falling into a cycle of negative equity — where their outstanding auto loan balances are higher than the value of their cars.
In the fourth quarter of 2025, 29.3% of trade-ins toward new car purchases were “underwater,” or had negative equity, according to Edmunds. That is the highest share since the first quarter of 2021, when 31.9% of trade-ins had negative equity, according to the data.
The average amount owed on trade-ins with negative equity rose to $7,214 — an all-time high, according to Edmunds. More than one-quarter of trade-ins had more than $10,000 in negative equity — also a record high.
Drivers trading in a car with negative equity typically need to come up with cash to pay that balance, or roll the debt into their new loan.
Other recent Edmunds data shows more drivers are taking on $1,000-plus monthly auto loan payments for both new and used cars.
