Increasing number of automobile purchasers are settling past vehicle loans before acquiring a new one
In the second quarter of 2025, the automotive market witnessed a concerning trend as the share of new vehicle trade-ins with negative equity reached its highest since Q1 2021, according to a report by Edmunds.
The report, which analyses the share of new vehicle trade-ins with negative equity, revealed that 26.6% of trade-ins in Q2 2025 had negative equity. This marks an increase since 2022, and the average amount of negative equity owed has significantly increased as well. In 2025, the average amount of negative equity stood at $6,754, a 50% increase from 2022.
Nearly one-third (32.6%) of upside-down trade-ins had between $5,000 and $10,000 in negative equity. Buyers who rolled negative equity into new vehicle purchases had an average monthly payment of $915 in Q2, which is the highest on record for such buyers and 21% more than the overall average of $756.
Ivan Drury, Edmunds' director of insights, stated that worsening affordability challenges, such as higher car prices and rising interest rates, are compounding the negative effects of decisions like trading in too early or rolling debt into a new loan. Despite the rising debt burden, the share of new vehicles purchased with a trade-in has held relatively steady.
The average age of a trade-in vehicle increased from 3.2 years in 2022 to 3.8 years in 2025, suggesting that despite holding onto their vehicles longer, buyers are still finding themselves in a position of negative equity. The specific identities of borrowers with negative equity who traded in their cars in Q2 2025 are not publicly available; however, the average negative equity at the time of purchasing new vehicles in Q2 2025 was approximately $6,000.
Drury cautioned that 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. The report also provides data on the average amount of negative equity owed, shedding light on the financial challenges faced by many car buyers.
Read also:
- visionary women of WearCheck spearheading technological advancements and catalyzing transformations
- Recognition of Exceptional Patient Care: Top Staff Honored by Medical Center Board
- A continuous command instructing an entity to halts all actions, repeated numerous times.
- Oxidative Stress in Sperm Abnormalities: Impact of Reactive Oxygen Species (ROS) on Sperm Harm
