New Car Shoppers Break Record For Negative Equity In Q2 2025

As the prices of new vehicles have risen dramatically in recent years – especially when coupled with sustained high interest rates – we’re seeing new car shoppers take action in various ways. That includes more and more new car shoppers taking out longer and longer loans in an effort to drive their monthly payments down to a more reasonable level, but regardless, the percentage of average monthly payments exceeding the $1,000 mark continues to set new records with each passing month. Now, an alarming number of customers are upside down on their loans, it seems.

According to new data from Edmunds, 26.6 percent of trade-ins on new car purchases in Q2 2025 had negative equity, up from 26.1 percent in Q1 2025 and 23.9 percent in Q2 2024. That’s the highest such share on record since Q1 2021, when 31.9 percent of all new-car trade-ins had negative equity. The average amount owed on those upside-down loans was $6,754, which is down a tad compared to Q1 2025’s figure of $6,880, but up from Q2 2024’s $6,255.

Regardless, more and more of these underwater car owners are adding serious debt to their next vehicle purchase, too. A total of 32.6 percent of underwater trade-ins in Q2 had between $5,000 and $10,000 in negative equity, compared to 31.9 percent in Q1 2025 and 30.2 percent in Q2 2024. Of that group, 23.4 percent of car shoppers owed more than $10,000 on their vehicles, compared to 24.5 percent in Q1 2025 and 20.7 percent in Q2 2024, and 7.7 percent owed more than $15,000 – versus 8.4 percent in Q1 2025 and 6.8 percent in Q2 2024.

“Consumers being underwater on their car loans isn’t a new trend, but the stakes are higher than ever in today’s financial landscape,” said Ivan Drury, Edmunds’ director of insights. “Affordability pressures, from elevated vehicle prices to higher interest rates, are compounding the negative effects of decisions like trading in too early or rolling debt into a new loan, even if those choices may have felt manageable in years past. And as buyers take on new loans with much higher interest rates than those from just a few years ago, even potential tax deductions can’t meaningfully offset the thousands more they’ll pay in interest. With a growing share of upside-down owners thousands of dollars in the red, many are at risk of getting stuck in a cycle of debt that only grows harder to break over time.”