1 In 4 People With A Trade-In Had Negative Equity In Q4          

Being "upside down" in your vehicle is a situation you don't want to find yourself in if you can help it. Also called having "negative equity"  - it's when you owe more than your car's true value.  As Car Pro Show host Jerry Reynolds explains here, this can happen for a few reasons like financing too long or rolling negative equity from one loan to another.

According to new Edmunds data, the average amount owed on upside-down cars loans is higher than ever, hitting an all-time high in the fourth quarter of 2024. Its analysts report that 1 and 4 people with trade-ins had negative equity of $10,000 or more.

Car Pro Show host Jerry Reynolds shares his advice on what to do if you're "upside down" in your vehicle here →

Here what Q4 2024 data from Edmunds¹ reveals:

• 1 in 4 new vehicle trade-ins are underwater. 24.9% of trade-ins toward new-car purchases had negative equity, up from 24.2% in Q3 2024 and 20.4% in Q4 2023. 
• Americans with upside-down car loans owe more money than ever before. The average amount owed on upside-down loans climbed to an all-time high of $6,838, surpassing Q3 2024's record of $6,458. In Q4 2023, the average amount owed on upside-down loans was $6,054. 
• 1 in 4 consumers with negative equity owe more than $10,000 on their auto loans. 24.6% of vehicle owners with negative equity who purchased a new-car replacement owed $10,000+ on their car loans in Q4 2024, an increase from 22.2% in Q3 2024. 8.5% of vehicle owners with negative equity owed $15,000+ in Q4 2024, an increase from 7.5% in Q3 2024. 

"Negative equity isn't a brand-new phenomenon in the auto lending space — in fact, it wasn't too long ago when more than a third of trade-ins toward new-car purchases were upside down," said Jessica Caldwell, Edmunds' head of insights. "What's particularly alarming in the Q4 figures is that a growing share of trade-ins are hitting the double-digit mark in thousands of dollars owed, making the cycle far more challenging for consumers to escape."

Rolling negative equity into a new car loan can definitely be hard on the pocketbook.  To illustrate the repercussions of this, Edmunds experts took a look at the differences in cost between consumers who financed a new vehicle involving a trade-in with negative equity in Q4 and the industry average for all financed new vehicles. It found that on average, buyers whose trade-ins had negative equity took on an additional $159 in monthly payments and $12,388 more in total amount financed than the industry average for all financed new vehicles. Edmunds says both of those figures represent all-time records. 

It's really important to find out if you're underwater before going into a dealership to purchase a new vehicle. To find out if you have negative equity,  you need to find out the current value of your vehicle and compare it against their payoff amount (which you can found on your most recent loan statement).

"The ramifications for trading in a vehicle well below sea level for a brand-new vehicle can be drastic and lead to a cycle of poor auto financing decisions," said Ivan Drury, Edmunds' director of insights. "If you find yourself significantly underwater on your loan, your best opportunity to rise to the surface is to hold onto the vehicle while keeping up with payments and maintenance."

Edmunds Q4 Negative Equity Data

Photo Credit: DuxX/Shutterstock.com.