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Why buyers are ‘upside down’ on car loans
Over 26% of new car trade-ins had negative equity in Q2 2025, driven by rapid depreciation and long loan terms, Edmunds reported.
- Edmunds reported 26.6% of new-vehicle trade-ins were underwater in Q2 of 2025, with average negative balance $6,754, up from $6,255 in 2024.
- Several factors explain this trend: new cars lose much value early, while loan terms near six years and payment allocation slow principal reduction, extending underwater periods for average trade-in age ~four years.
- Breakdowns show all of Edmunds' data: 32.6% carried $5,000–$10,000 negative equity, 23.4% owed over $10,000, with average APRs of 7.3% for new cars and 10.9% for used cars.
- Dealership practices mean dealerships often roll owed balances into new loans, saddling buyers with higher monthly payments and raising long-term costs through negative equity rollovers.
- To get right side up, Edmunds suggests sticking with the car, refinancing, rolling the balance into a new loan or lease, noting each has trade-offs including lease specials $299 or less.
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Total News Sources36
Leaning Left3Leaning Right2Center27Last UpdatedBias Distribution84% Center
Bias Distribution
- 84% of the sources are Center
84% Center
C 84%
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