Nearly one-third of American car buyers with a trade-in are underwater on their loans, according to new industry data. 30.5% of buyers trading in a vehicle toward a new purchase owe more than the car is worth, a figure that has risen by 4.2 percentage points from a year ago, according to J.D. Power's March 2025 report. The average amount owed on these underwater trade-ins reached $7,214 in the fourth quarter of 2025, an all-time high, while 27% of trade-ins carried $10,000 or more in negative equity, also a record high.
Part 1: Immediate Action & Core Facts
The share of underwater buyers has been growing since 2022, though it remains lower than pre-pandemic levels. In 2019, the annual share of trade-ins with negative equity for new-car purchases was 33.6%, according to J.D. Power data. The average monthly payment for buyers who rolled negative equity into a new loan reached $916 in the fourth quarter of 2025, $144 more than the average monthly payment of $772 for all new-car purchases.
Part 2: Deeper Dive & Context
Historical Trends
The data show that the supply chain crisis, which drove up trade values, was a low point for negative equity. In 2022, the yearly share of trade-ins with negative equity was 16%, but it has been rising steadily since then. Analysts note that while negative equity is not new, the amount owed is particularly concerning.
Industry Perspectives
Tyson Jominy, a senior vice president for J.D. Power, described the recent trend as a 'mean reversion' toward pre-pandemic levels. Joseph Yoon, an Edmunds consumer insights analyst, called the dollar amount of negative equity 'troubling' and emphasized that the high levels of debt being rolled into new loans could strain buyers' finances.
Financial Implications
When a car buyer trades in a vehicle with negative equity, the remaining loan balance is typically rolled into the new car loan. This practice can lead to higher monthly payments and longer loan terms, increasing the risk of financial strain for consumers. The record-high average payment of $916 for underwater trade-ins highlights the growing financial burden on car buyers.
Consumer Impact
The rising negative equity trend raises concerns about the long-term financial health of car buyers. Analysts warn that high levels of debt rolled into new loans could lead to higher default rates and financial instability for consumers. The data suggest that buyers should carefully consider their financing options and avoid taking on excessive debt when purchasing a new vehicle.