Auto owners upside down on their car loans are becoming “more common and expensive than ever”, according to a new report by automobile research company Edmunds.
“Underwater trade-ins hit an all-time high,” said Edmunds.
The latest findings reveal just how bad things are for those in negative territory on their auto loans.
The data from Edmunds shows 29.3% of those who traded in their automobile towards the purchase of a new vehicle had negative equity (meaning owed more on their vehicle than it was worth) in the last quarter of 2025, making it the highest share since 2021.
The average amount owed on underwater trade-ins hit an all-time high of $7,214.
27% of upside-down trade-ins carried $10,000 or more in negative equity. Another record-high, according to Edmunds.
17.4% of consumers still owed between $10,000 and $15,000, and just over 9% had a balance higher than $15,000, both hitting records.
And it gets worse.
It used to be that auto loans would only last for 72 months, The report said 40.7% of new-vehicle purchases involving negative equity are now financed with 84-month loans.
Though this route can lower monthly costs, the analysts at Edmunds point out it doesn’t address the problem of paying off the loan but instead extending it creating more debt.
According to Lending Tree, Generation X borrowers, people born between 1965 and 1980, took out the longest auto loans currently. Around 53% have loans beyond 72 months.
The same age group also had the highest monthly car payments, nearing $600 a month with several hovering over $1,000 a month.
Going into 2026, average monthly car payment for buyers who carried their negative value and transferred it into a new loan was around $916.
“Typical trade-in behavior is colliding with higher prices and borrowing costs, making negative equity harder to escape once buyers fall in,” said Edmunds.com
