Almost 30% of recent new car buyers were underwater on loans for their trade-ins, according to new data released Thursday, Jan. 15 by Edmunds.com.
The group said 29.3% of trade-ins that were used in new car purchases were underwater in the fourth quarter of 2025, which means the owners owed more on their existing vehicle than it was worth at the time of trade-in. Edmunds said that figure represented the highest share of underwater car buyers it has recorded since the first quarter of 2021, when the group said 31.9% of trade-ins had negative equity on their trade-ins.
The finding comes as average new car prices have topped $50,000, according to Kelley Blue Book.
Edmunds said car buyers owed an average of $7,214 on their trade-ins in the fourth quarter of 2025, which was the highest level the group said it has ever recorded.
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The group attributed the rise in negative equity on trade-ins to rising new car prices and long loans that originated during the Covid-19 pandemic, and a lack of deals during that time.
“Many underwater trade-ins today involve loans originated during the pandemic-era chip shortage, when new-vehicle inventory was scarce and incentives were minimal,” Edmunds said. “With fewer discounts available, many buyers paid closer to or above MSRP and often had less flexibility to choose lower-priced models or trims.”
Edmunds said car buyers owed an average of $6,905 in the third quarter of 2025.Here’s how car buyers with trade-ins have fared in the past two years:
Edmunds said its data “highlights how easily negative equity can become a cycle that’s difficult to escape.”
“Rolling debt forward may offer short-term relief, but it often leaves buyers with higher payments and fewer options the next time they’re in the market,” the group said.
Edmunds offered these tips for avoiding the following tips for avoiding that cycle:
Nearly 50% of all new car buyers are opting for loans that last longer than 72 months, according to a new poll from Lending Tree.
According to the poll, 47.5% of Americans with auto loans have terms longer than 72 months, including 7.6% who have terms longer than 84 months.
The poll showed that borrowers from Generation X, or people born between 1965 and 1980, are taking out the longest auto loans currently: 53% have of them terms longer than 72 months, and 7.7% have terms over 84 months.
Gen X auto loan borrowers also have the highest monthly car payments, and they most likely to have car payments above $1,000. The average monthly payments for Gen X are $594, according to the poll.

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