Nearly 1 in 3 Car Buyers Are Underwater on Their Trade-In — and the Dollar Amount Just Hit a Record

The Numbers

An estimated 30.5 percent of car buyers who have a trade-in owe more on their current vehicle than it is worth, according to J.D. Power's automotive forecast for March 2026. That figure is up 4.2 percentage points from a year ago and has risen steadily since 2022, when the share briefly bottomed out at 16 percent due to pandemic-era supply chain dynamics.

The prevalence alone is not the most striking data point. It is the amounts. The average negative equity balance on trade-ins reached $7,214 in the fourth quarter of 2025, according to auto website Edmunds — an all-time high in the data series. Additionally, 27 percent of those underwater trade-ins carried $10,000 or more in negative equity, also a record, according to Edmunds.

"While these levels of negative equity are nothing new … it's the amount underwater that is the real, and troubling, story," said Joseph Yoon, consumer insights analyst at Edmunds, in a statement to CNBC.

What Happens to That Debt

When a buyer trades in a car with negative equity, the remaining loan balance does not disappear. It rolls into the financing for the next vehicle purchase, effectively stacking old debt on top of new debt.

The average monthly payment for buyers who rolled negative equity into a new car loan reached $916 in the fourth quarter of 2025, according to Edmunds. That is a record high, and $144 more per month than the average payment of $772 for all new-car buyers — including those without negative equity. The buyer who starts underwater is paying nearly 19 percent more per month than the typical new-car purchaser before the cost of the new vehicle is even considered.

Among new-car purchases involving negative equity, 40.7 percent are now financed with 84-month loans — a seven-year term — according to Edmunds data. Longer loan terms reduce monthly payments but slow the rate at which buyers build equity, increasing the risk of remaining underwater through the vehicle's ownership period.

Why It Happened: Pandemic Distortions and Their Aftermath

The dynamic has clear roots in the 2021–2023 period. During the height of the pandemic supply chain crisis, a shortage of new vehicles drove up the value of used cars to historically elevated levels. Trade-in values surged, and negative equity rates dropped: in 2022, only 16 percent of trade-ins carried negative equity, compared to 33.6 percent in 2019, the pre-pandemic baseline, according to J.D. Power data.

Buyers who purchased vehicles between 2022 and 2023 — at peak prices, sometimes above sticker — are now the core of the negative equity problem. The average age range of trade-ins with negative equity is 3 to 4 years old, according to Edmunds, placing the purchase dates squarely in that anomalous market period.

Tyson Jominy, a senior vice president at J.D. Power, described the current situation as "mean reversion" — the market returning to pre-pandemic norms after an unusual period of inflated trade-in values. "The data show the supply chain crisis, which drove up trade values, was a low point for negative equity," Jominy said in comments to CNBC. "When there were fewer new vehicles available to buy, there were fewer consumers coming back to market with trades, which pushed up used car values beyond organic demand for the sector."

Structural Factors: Higher Prices, Longer Loans

The mean reversion explanation accounts for why negative equity is rising, but not entirely for why the dollar amounts are at record highs. That part of the story is structural.

The average price of a new car in February 2026 was $49,353, according to Kelley Blue Book's most recent data. That is approximately 30.3 percent higher than the average price of $37,876 in February 2020. As vehicles have become more expensive, buyers finance a larger share of the purchase and increasingly extend loan terms to manage payments — setting the conditions for deeper negative equity when those vehicles are traded in.

"As vehicles have become more expensive, buyers finance a larger portion of the purchase and extend loan terms to afford the payments," said Stephen Kates, a certified financial planner and financial analyst at Bankrate. "Longer loans translate to a greater chance that the value of the car falls below what is owed."

How This Compares to Pre-Pandemic Levels

The current 30.5 percent negative equity rate is below the 33.6 percent recorded annually in 2019. On the prevalence measure alone, the situation is not historically unprecedented. But 2019 does not represent a healthy baseline — it was itself considered a period of elevated negative equity by industry analysts.

More importantly, the dollar amounts in the current period exceed anything recorded in 2019. The $7,214 average negative equity balance and the $916 average monthly payment for rolled-in negative equity are both all-time records, not merely a return to pre-pandemic norms. The debt burden per underwater buyer is larger than it has ever been, even if the share of buyers in that position is still slightly below 2019 peaks.

Delinquency Rates: Not Yet a Crisis

One indicator that distinguishes the current environment from a systemic risk: auto loan delinquency rates remain contained. Roughly 1.5 percent of auto loans are at least 60 days past due, according to a TransUnion report cited by CNBC. That is on par with the fourth quarter of 2019, when the share was also 1.5 percent.

The delinquency data suggests that while the structural burden on underwater buyers is growing, most are currently managing their payments. Whether that holds depends significantly on the broader economic environment — including the employment picture and any further increases in new vehicle prices driven by the Iran war's energy shock or tariff policy.

CNBC has separately reported that higher gas prices resulting from the Iran conflict could offset the benefit of larger federal tax refunds for many households, reducing the disposable income available to service high auto loan payments.

The Bottom Line

The negative equity problem in the U.S. auto market is a direct legacy of the pandemic era — a period when prices were anomalously high and buyers took on long-term debt to purchase vehicles now worth less than what is owed. Three to four years later, those buyers are arriving at dealerships in a bind, rolling record-high debt balances into new purchase loans and committing to monthly payments that exceed what other buyers are paying.

Yoon cautioned against certainty about what comes next: "Whether this growth in negative equity leads to future economic ramifications for buyers, both in instance and amount, remains to be seen." The data, however, are unambiguous that the immediate burden on underwater buyers is heavier than it has ever been.